Abstract
Labour productivity is one of the key drivers for higher earnings and welfare standards in every economy. The problem of how to ensure the growth of labour productivity is especially relevant to less developed economies and forces justification of the factors affecting sustainable productivity growth. The purpose of this research is to test if the investment in tangible assets improves labour productivity in the European manufacturing industry and to reveal the countries with inefficient investment. The results show that with consideration of all European countries, a 1% increase in gross investment in tangible goods (G.I.T.G.) per person employed (P.E.) has a 0.0373% long-run effect on apparent labour productivity (A.L.P.). Considering various types of investments in tangibles, only an increase in gross investment in existing buildings and structures (G.I.E.B.S.) per P.E. and gross investment in machinery and equipment (G.I.M.E.) per P.E. caused growth of A.L.P. However, the impact of investment in assets on A.L.P. significantly differs among the countries and it is revealed that many European countries, which are characterised by low productivity, use investment inefficiently.
Highlights
The growth of productivity, which is closely related to sustainable development and economic prosperity, remains a topical issue in any developed or developing economy
The results show that with consideration of all European countries, a 1% increase in gross investment in tangible goods (G.I.T.G.) per person employed (P.E.) has a 0.0373% long-run effect on apparent labour productivity (A.L.P.)
The impact of investment in assets on A.L.P. significantly differs among the countries and it is revealed that many European countries, which are characterised by low productivity, use investment inefficiently
Summary
The growth of productivity, which is closely related to sustainable development and economic prosperity, remains a topical issue in any developed or developing economy. Productivity reflects the efficiency of production, and higher productivity represents the improved competitiveness at both micro and macro levels. Technological knowledge, physical and human capital affect the indicators of productivity (Mankiw & Taylor, 2008). The impact of investment in tangibles on productivity remains a relevant problem for scholars and practitioners. This empirical study focuses on the analysis of labour productivity with consideration of the availability of this measure in statistics. Higher labour productivity ensures a higher level of wages conditioned by higher outputs gained. The problem of productivity growth has earned much
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