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Quality of Institutions and Total Factor Productivity in the European Union

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  • Michał Bernard Pietrzak

  • Adam P. Balcerzak

Abstract

The key challenge for mid- and long-term policy in the European Union countries is to use the potentials of knowledge-based economy (KBE), which is a condition for maintaining high total factor productivity in Europe. For this reason, the relationship between the quality of an institutional system and total factor productivity in the EU countries has been examined. The quality of the institutional system is defined here from the perspective of incentives that influence the use of the potential of KBE. In order to determine the level of effectiveness of the institutional system in the analysed countries the method for linear ordering of objects was applied based on data from Fraser Institute. The main hypothesis of the article states that the quality of the institutional system in the context of KBE has a significant influence on the level of total factor productivity in the EU. In order to verify this hypothesis, the parameters of the Cobb-Douglas production function were estimated, which allowed the evaluation of TFP for the EU countries. The calculation made in the article based on Eurostat data. In order to identifying the relationship between the quality of the institutional system and the level of TFP a panel model was applied using data from a conducted for years 2000-2010.

Suggested Citation

  • Michał Bernard Pietrzak & Adam P. Balcerzak, 2016. "Quality of Institutions and Total Factor Productivity in the European Union," Statistics in Transition new series, Główny Urząd Statystyczny (Polska), vol. 17(3), pages 497-514, September.
    • Handle: RePEc:csb:stintr:v:17:y:2016:i:3:p:497-514
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    References listed on IDEAS

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    Cited by:

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    2. Francisco Javier Escribá-Pérez & María José Murgui-García, 2018. "Technology catching-up and regulation in European regions," Journal of Productivity Analysis, Springer, vol. 49(1), pages 95-109, February.
    3. Zoran Boroviæ & Mladen Rebiæ & Dalibor Tomaš, 2020. "Total factor productivity drivers in the selected EU countries: Cointegration approach," Zbornik radova Ekonomskog fakulteta u Rijeci/Proceedings of Rijeka Faculty of Economics, University of Rijeka, Faculty of Economics and Business, vol. 38(1), pages 295-315.

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    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy

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