Empirical essays on labour productivity in EU manufacturing

Abstract

The main objective of the present thesis is to analyze the underperformance of labour productivity growth in manufacturing in EU member states and the existence of persistent differences among them in the last decades in comparison to behaviour of other advanced economies as United States.

This objective can be decomposed into three sub-objectives. So first, we conduct a comparative analysis of differences in labour productivity growth in manufacturing and next, we try to find out if the differences in labour productivity are due to changes in the industrial structure, to labour productivity deficiencies itself or a combination of both. Finally, in the context where knowledge is an important driver of economic growth and competitiveness in advanced economies, and as intangible assets are considered as “knowledge capital”, we examine the role of investment in intangible assets as contributor to labour productivity growth. The purpose is to identify which intangible assets contribute most to labour productivity growth.

To this end, different methodologies have been implemented; firstly a decomposition of gross value added per capita in its main determinants, secondly, we computed two indexes: a structural change index and an index of differences in manufacture’s composition. Thirdly, two different methodologies consisting of a decomposition of aggregate productivity differences into different sources have been implemented. And finally, in order to estimate the contribution of an increase in investment in intangible assets to the growth of labour productivity, a production function Cobb-Douglas has been estimated.

The main findings are as follows: differences in labour productivity between the “periphery” Spain and the “centre” Germany are cross-sectional as well as within sectors. Next, industry structure is changing too slowly and is misguided; it does not totally justify the gap in productivity between both countries. Thirdly, intangible assets belonging to the category economic competencies are the main drivers of labour productivity growth, but their effect is not homogeneous. Finally, the existence of heterogeneous effects of investment in intangibles should be taken into account in the design of strategic industrial policy measures.