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Structural Change, Institutions and the Dynamics of Labor Productivity in Europe

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Pariboni,  Riccardo
Politische Ökonomie von Wachstumsmodellen, MPI for the Study of Societies, Max Planck Society;

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JEE_30_2020_Pariboni.pdf
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Citation

Pariboni, R., & Tridico, P. (2020). Structural Change, Institutions and the Dynamics of Labor Productivity in Europe. Journal of Evolutionary Economics, 30(5), 1275-1300. doi:10.1007/s00191-019-00641-y.


Cite as: http://hdl.handle.net/21.11116/0000-0004-DB10-3
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”.