The Role of Knowledge Capital in Total Factor Productivity Changes: The Case of Agriculture in EU Countries

Abstract

The present study concerns the impact of knowledge capital on total factor productivity (TFP) changes in 27 European Union (EU) countries. The TFP analysis covered the years 2009-2013. The study conducted was based on a Malmquist productivity index. The knowledge capital was approximated through investments in research and development in the years 2000 and 2008. Furthermore, the study included external benefits resulting from the R&D activities in other countries. In addition to the knowledge capital, the variables approximating human capital were accepted as determinants of TFP, i.e., the percentage of farm managers with full agricultural training and the percentage of farms managed by holders aged 55. The impact of knowledge and human capital on TFP was determined using a linear regression model. The results of the study indicate that the R&D expenditures incurred in the year 2000 are the stimulants of productivity growth, which confirms the assumption that there is a time lag between R&D and its benefits. Moreover, a positive effect on TFP growth was observed for the variable approximating human capital, i.e., the participation of farmers over the age of 55.