Article | Open Access | Published: 31 May 2006
Labor Productivity and Economic Growth, What Causes What: An Empirical Analysis
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Abstract:
The paper assesses the dynamic association between output growth and labor productivity growth rates using annual data of the period from 1972-73 to 2004-05. The estimates, based on Johansen full information maximum likelihood technique, indicate that both the rates are cointegrated and move together in the long run. These results are robust to different lag orders. The study then used error correction model to explore the long run as well as short run causal linkages between them. Regarding the long run causation, the estimates of error correction term indicate a unidirectional causation that runs from labor productivity growth rate to output growth. This piece of evidence is suggesting that improving labor productivity would result higher economic growth in Pakistan. Regarding short run causality relationship, the analysis provides evidence based on the estimated F-values that there is feedback association between the rates of economic growth and labor productivity growth.
Keywords:
Economic growth, labor productivity, poverty level, human capital.
Publisher:
ILMA UNIVERSITY
Published:
31 May 2006
Issue:
Issue 1 : Volume 2
E-ISSN:
2409-6520
P-ISSN:
2414-8393
This is an open access article distributed under the terms of the Creative Commons Attribution CC BY 4.0 license, which permits any use, distribution, and reproduction of the work without further permission provided the original author(s) and source are credited.