A Survey of Challenges to Growth: the Productivity Puzzle in the Context of (new) Growth Determinants (D1.1)

How can productivity growth be improved in EU economies? This is a challenging question as productivity is the outcome of a complex set of factors, stemming from both the supply and demand sides. This paper reviews key factors that have been highlighted in the literature, from both a theoretical and empirical perspective.

These factors include external determinants such as institutions, the macroeconomic environment and access to finance, and firm level determinants such as intangible assets and global value chains.

A summary of the determinants of productivity

External (environmental) determinants Internal (firm-level) determinants
Institutions Capital and composition of capital
Macroeconomic environment Resource allocation
International trade, exchange rates, FDI Labour and human capital
Technological environment Ageing
Access to finance and financialisaton R&D
Financialisation in the economy Trade and global value chain participation
Policies Industry 4.0
Intangible capital

Source: Table 4 in Redek et al. (2019) A Survey of Challenges to Growth: the Productivity Puzzle in the Context of (new) Growth Determinants.

The paper argues that a comprehensive understanding of these factors and their interlinkages is needed to inform policies. This is particularly the case for newer and growing factors such as: global value chains; ageing; new technologies (digitalization, ICT, other I4 technologies); and firm size, market entry and growth.

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