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.