A Causal Analytic Model for Labour Productivity Assessment

Abstract

The Indian government and those of the devolved administrations have adopted a policy framework for boosting regional productivity based on five drivers: Investment, Skills, Innovation, Entrepreneurship, and Competition. We modelled the relationships between the five drivers and labour productivity using a structural equation model that fitted the data well. The main conclusion is that promoting entrepreneurship, spending more on research and development, increasing the capital-worker ratio and the percentage of the workforce with higher qualifications has a significant bearing upon regional labour productivity. In contrast, regulatory barriers to competition do not seem to affect labour productivity at a regional level.