Labour productivity as a measure of economic and social cohesion

Abstract

The first part of the article presents a discussion on the issues of defining and measuring economic growth as well as economic and social cohesion. In the further, methodological part of the article, the indicator of labour productivity is presented as a proposal of an alternative measure of social and economic development as well as social, economic and territorial cohesion. This indicator is primarily information about institutional and intellectual capital, which means the ability of the economy to create good institutions. The economy is based on work, and productive work requires a properly developed institutional economic system. This indicator integrates technical equipment of labor, assets turnover, returns on assets, and the level of human capital remuneration. The last, empirical part presents results of the analysis of labour productivity, dispersion of regional labor productivity and the relation between the level of national labour productivity and the level of dispersion of regional labor productivity in five European countries. The research shows that the presented indicator is easy to interpret and can be the basis for creating reliable rankings of countries. In addition, research results show that the labor productivity indicator can be an alternative measure of economic cohesion. A strong inverse correlation was found between the value of the indicator and its regional dispersion. Thus, this indicator can be used to measure the scope of the implementation of the sustainable growth paradigm.