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Structural change, institutions and the dynamics of labor productivity in Europe

Author

Listed:
  • Riccardo Pariboni

    (Max Planck Institute for the Study of Societies (MPIFG)
    Dipartimento di Economia)

  • Pasquale Tridico

    (Dipartimento di Economia)

Abstract

The objective of this paper is to explain the reasons behind the dynamics of labor productivity (LP) growth during a process of institutional and structural change. We show - by means of a theoretical discussion and an empirical analysis, conducted on a sample of 25 European countries for the period 1995–2016 - that four main channels contribute to explaining the evolution of LP. First, the speed of investment, which incorporates innovation and favors an increase of LP growth; second, the speed of Research and Development (R&D), which allows for the creation of new ideas and shows the “dynamism of a society”, having positive effects on LP; third, the deregulation of labor markets and the increase of temporary employment, both of which encourage labor-intensive strategies by firms, with low value-added and low productivity gains; fourth, the direction of structural change, which can take place toward services industries affected by “Baumol’s disease”.

Suggested Citation

  • Riccardo Pariboni & Pasquale Tridico, 2020. "Structural change, institutions and the dynamics of labor productivity in Europe," Journal of Evolutionary Economics, Springer, vol. 30(5), pages 1275-1300, November.
    • Handle: RePEc:spr:joevec:v:30:y:2020:i:5:d:10.1007_s00191-019-00641-y
    DOI: 10.1007/s00191-019-00641-y
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    More about this item

    Keywords

    Labor productivity; R&D; Institutions; Labor flexibility;
    All these keywords.

    JEL classification:

    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs

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