The Relationship between Labor Productivity and Economic Growth in OECD Countries

Abstract

In the course of globalization, the countries entered into an intense competition between each other. In order to achieve the competitive advantage, countries pay significant importance to the technological advancements. By improving the productivity, the technological innovations and developments allow the countries to make production at lower costs. The increase in factor productivities would enable higher levels of output in the economy. Since the factor productivity influences many other factors and the developed countries meet these criteria better than developing countries do, the factor productivities are higher in developed countries, when compared to those in developing countries. For this reason, in this study, the relationship between labor productivity, which is a partial factor productivity, and economic growth in seven OECD countries for the period between 2008 and 2014 by utilizing the panel data analysis method. According to the test results, we find a unidirectional causality relationship from economic growth to labor productivity.