Effects of Labor Productivity and Growth of Manufacturing Sector on Overall Growth of the Nation – A Panel Data Analysis of the Major Economies

Abstract

Labor productivity always plays an important part in the growth of manufacturing sector of any nation, and certainly, in the growth of GDP as well. Now, the relationship between these three variables has been of interest to the researchers because few nations have experienced labor productivity–led economic growth, whereas for others it has been the other way round. In this chapter we have studied the relationship between labor productivity, manufacturing output, and growth of GDP, for 25 major economies across the globe, covering the period 2000–2015, with the help of simultaneous equation system for individual nations as well as panel data analysis, covering all the nations together. Study of this relationship has, hardly, been done before which is our prime motivation behind the study. Our findings suggest that in most of the nations, these variables have significant impact on one another but there are exceptions as well. Apart from that, there are variables like energy consumption, health status, life expectancy, foreign direct investment, etc., which are significant in influencing these variables. So, policy measure suggests that importance should be given not only on labor productivity or output of manufacturing sector but also on factors that can influence these variables.

Citation

Chatterjee, N. and Chatterjee, T. (2021), "Effects of Labor Productivity and Growth of Manufacturing Sector on Overall Growth of the Nation – A Panel Data Analysis of the Major Economies", Pal, M.K. (Ed.) Productivity Growth in the Manufacturing Sector, Emerald Publishing Limited, Leeds, pp. 17-29. https://doi.org/10.1108/978-1-80071-094-820211002