Labor productivity in the agriculture, structural shifts and economic growth in the Central and Eastern European countries

Abstract

Purpose. In our article, we assess the scope and directions of changes in agricultural labor productivity compared to other sectors of the economy. Methodology / approach. For our survey we choose 15 countries: (і) EU countries – Bulgaria, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia and Slovenia, as well (іі) post-Soviet European countries – Ukraine, Moldova, Belarus, russia and also (ііі) Albania for period 1996–2019. We use an empirical methodology designed to analyze structural decomposition of labor productivity into the growth effect within the sector and structural dynamic and static effects, often called ‘shift-share analysis’. We analyze process of convergence of sectoral labor productivity and its impact on economic growth. Results. Labor productivity grows in the agricultural sector of the economy at the fastest rate, on average by almost 12 % per year. The growth effects within the industry takes a dominant position in all sectors of the economy in the countries of Central and Eastern Europe and its share is on average 88.5 %, and the structural effects are as follows: the dynamic effect is almost 1%, the static effect is 10.4 %. We have confirmed that the agricultural sector is gaining weight in the economic growth of the countries of Central and Eastern Europe, the influence of the service sector is increasing, although together they do not exceed the influence of the growth of value added in industry. Originality / scientific novelty. For the first time we have used the methodology of decomposition of labor productivity growth into three effects: growth, dynamic and static ones for the period before the financial crisis 2008 and after the crisis for 15 countries of Central and Eastern Europe. Using panel GLS estimator with fixed effects we estimate the impact of labor productivity on economic growth in different sectors for 1991–2020 period. Practical value / implications. The main results of the study can be used for elaboration of effective economic policy in agriculture development in Central and Eastern European countries; for identification of structural shifts in labor productivity in different sectors of the economy before and after the financial crisis; for estimation of the level of convergence between different sectors of the economy; determining main factors of increasing value added in agriculture in Ukraine and other Central and Eastern European countries; implementation structural changes in economy in the period of crisis.