Integration and Productivity of Labor Factor in Europe. Perspective from Nationality and the Attainment Level

Abstract

Productivity in Europe remains stagnant over a long period of time for several reasons: structural barriers hampering proper development and the diffusion of innovations; and also due to high structural unemployment. This puts a significant brake on growth and competitiveness. A high-potential alternative for improving productivity lies in increasing labour participation and the attraction/retention of talent as a result of European integration. Therefore, this study examines how economic growth is affected by labour productivity and the local and foreign workers' employment rates, as well as their level of achievement. Using the Durbin Spatial Model (DSM), we analyse OECD data from 13 European countries covering the period 2000-2017. Our results confirm, first of all, that there has been a positive convergence among European countries and that it is of considerable benefit for the growth of countries with different levels of development. In terms of labour productivity, it positively influences economic growth, especially for highly skilled local workers. Moreover, it is confirmed that increased participation has a statistically significant impact on each country's growth rate in the studied sample. In terms of educational levels, an increase in the number of workers with a high and medium level of education entails a growth that is also transferred to neighbouring countries. Also, these types of strategies serve to create conditions that allow for attracting and retaining talent in the long term, which also generates positive effects on growth itself, but also for neighbouring countries in the same area of integration.

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