Verifying the relation between labor productivity and productive efficiency by means of the properties of the input-output matrices. The European case

Abstract

This article discusses the relationship between labor productivity and the degree of production efficiency for 24 countries inside the European Union (EU) over a period of 17 years. A panel data econometric model is used to estimate it. To this end, an indicator of productive efficiency has been applied. It is based on the dominant eigenvalue of the matrix of technical coefficients of the input-output model. This indicator allows the relationship between the economic sectors of each country and its productive technologies to be taken into account. The results reveal a significant relationship between the proposed productive efficiency indicator and labor productivity. Finally, several implications from a policy perspective are suggested as concluding remarks.