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EBRD Transition Report 2014 – Other drivers of labour productivity

TRANSITION REPORT 2014 Innovation in Transition

Other drivers of labour productivity

In addition to innovation and the quality of management, other factors do of course also affect labour productivity. Analysis shows that higher levels of capacity utilisation and greater capital intensity (in other words, capital per worker) are typically associated with higher levels of productivity.28 Firms that are located in a country’s capital or main business centre tend to be more productive, as they have access to better supporting infrastructure and a larger pool of skilled labour. Skilled labour is itself an important factor, as firms in which a higher percentage of employees are university graduates tend to be more productive.

The results also confirm that higher levels of competition – particularly competition with foreign firms – can put pressure on firms to improve productivity. Our analysis confirms that BEEPS firms that sell primarily in national or international markets are more productive than firms that primarily target local markets. There is also evidence that majority foreign-owned firms tend to be more productive. The effects of economic openness and firms’ integration into global production chains are discussed in more detail in Boxes 2.3 and 3.2.