Labour, along with capital and the technological level, is considered a major factor in the neoclassical models of economic growth. These models are based on applying the Cobb-Douglass
production function, which underlies the concept of economic growth accounting developed by R. Solow and M. Abramovich, and subsequently further developed by E. Denison and A. Meddison, among
others. The growth accounting is intended to measure the concrete impact of the fundamental growth factors by differentiation of the production function. As a result of this differentiation the growth rate of aggregate output is presented as the sum total of the
growth rates of labour and capital, weighed by their relative shares in income, and the
change in total factor productivity. The formulated relationship takes into account
the assumption of constant returns to scale of output, of decreasing marginal labour
and capital productivity, and of competitive Impact of Labour on Economic Growth in Bulgaria (1991 – 2013) economic environment. As unrealistic as some of these assumptions might be,
economic growth accounting is used as a methodological tool kit to study the relation
of economic growth in real life to changes in its major supply sources.
The paper analyses the impact of labour on real GDP growth rates in Bulgaria using
the above specified set of tools. It begins by examining the relationship between
long- and short-term dynamics of the two variables over the whole post-1990 period.
Next, four alternative assessments are made of labour’s relative share in income
which, under the assumption of production factor pricing based on the marginal
productivity of these factors, is considered as a labour elasticity coefficient in the twofactor
production function. In the last stage, based on the outcomes for the elasticity
coefficient and labour growth data, the Fig. 1. Employment indices (according to LFS) and real GDP indices, (with 1990 as a base = 100%) Source: Author’s calculations based on: http://www.nsi.bg and other NSI data contribution of this factor to the realised
rates of economic growth is assessed and characterised.
The paper measures labour input through employment which is a standard practice in
most contemporary empirical studies with a focus on the behaviour of actual rather
than potential GDP. Employment itself is measured in two ways: by means of Labour
Force Survey (LFS) data for the whole post-1990 period relating to the number of
employed, and by drawing from the national accounts (NA) data for the period after 1995
related to the number of man hours worked.
Labour, along with capital and the technological level, is considered a major factor in the neoclassical models of economic growth. These models are based on applying the Cobb-Douglassproduction function, which underlies the concept of economic growth accounting developed by R. Solow and M. Abramovich, and subsequently further developed by E. Denison and A. Meddison, amongothers. The growth accounting is intended to measure the concrete impact of the fundamental growth factors by differentiation of the production function. As a result of this differentiation the growth rate of aggregate output is presented as the sum total of thegrowth rates of labour and capital, weighed by their relative shares in income, and thechange in total factor productivity. The formulated relationship takes into accountthe assumption of constant returns to scale of output, of decreasing marginal labourand capital productivity, and of competitive Impact of Labour on Economic Growth in Bulgaria (1991 – 2013) economic environment. As unrealistic as some of these assumptions might be,economic growth accounting is used as a methodological tool kit to study the relationof economic growth in real life to changes in its major supply sources.The paper analyses the impact of labour on real GDP growth rates in Bulgaria usingthe above specified set of tools. It begins by examining the relationship betweenlong- and short-term dynamics of the two variables over the whole post-1990 period.Next, four alternative assessments are made of labour’s relative share in incomewhich, under the assumption of production factor pricing based on the marginalproductivity of these factors, is considered as a labour elasticity coefficient in the twofactorproduction function. In the last stage, based on the outcomes for the elasticitycoefficient and labour growth data, the Fig. 1. Employment indices (according to LFS) and real GDP indices, (with 1990 as a base = 100%) Source: Author’s calculations based on: http://www.nsi.bg and other NSI data contribution of this factor to the realisedrates of economic growth is assessed and characterised.The paper measures labour input through employment which is a standard practice inmost contemporary empirical studies with a focus on the behaviour of actual ratherthan potential GDP. Employment itself is measured in two ways: by means of LabourForce Survey (LFS) data for the whole post-1990 period relating to the number ofemployed, and by drawing from the national accounts (NA) data for the period after 1995related to the number of man hours worked.
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