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|
|Access to finance and financialisation||R&D|
|Financialisation in the economy||Trade and global value chain participation|
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.