Relationship between labour productivity and its remuneration. The case of agriculture

Abstract

The article aims at presenting the fundamental relationship between remuneration and productivity of labor factor. This relationship is explored analytically and empirically. It is investigated at the level of the agricultural sector, derived from the microeconomic level, i.e. an agricultural producer. Based on an optimal solution of the income maximisation problem, we derive the determinants of remuneration of the labour factor, i.e. income in agriculture. We explore analytically the improvement of labour productivity. We also take into consideration the issue of the importance of subsidies which can be refered to as the second potential source of agricultural producer's income. The empirical evidence is based on the FADN (Farm Accountancy Data Network) data for 2004-2012 for Member States that joined the European Union in 2004. We examine the statistical relationship between the indicators of developments in the productivity of the labour factor, income and the level of subsidies in selected countries. Keywords: objective function of an agricultural producer, productivity of the labour factor, remuneration of the labour factor;