Labour productivity growth determinants in the manufacturing sector in the Baltic states

Abstract

This article seeks to derive the determinants of labour productivity growth in the Baltic states’ manufacturing sector and comparatively analyse the results. To achieve this, first, the growth rate of value added and its main contributors, namely hours worked and the growth rate of labour productivity, have been determined. Second, the main contributors to the growth rate of labour productivity, namely the contributions of labour composition, capital, and total factor productivity (TFP), have been established. Last, following the results, the relevant comparative analysis of newly derived indicators in the manufacturing sector has been accomplished, and conclusions have been presented. This paper used the growth accounting research methodology. Research limitations: the research was performed through the primary sources of growth approach, that is, only those determinants that remain important are incorporated in the model. Practical implications: the newly derived contributors to the growth rate of labour productivity reveal actual growth sources targeted to derive conclusions. The latter could be relevant for policy recommendations at both the national (e. g. guidelines for governmental policies for the selected economies) and the international (e.g., guidelines for EU policy and acts) levels. Originality and value: the novelty of the present study lies in the fact that the growth accounting method had not previously been applied in the manufacturing sector for the Baltic states.