Productivity of labor

Abstract

According to Dollar and Wolff (1993) labor productivity indicates the extent to which a country can be a competitive low-cost producer while maintaining high wages. Total factor productivity (TFP), on the other hand, measures the output produced by given amounts of labor and capital together with a high TFP meaning that both capital and labor can earn large returns while the cost of production remains low. According to Dollar and Wolff (1993), a nation with high labor productivity and high TFP is one that can compete intemationally with high incomes and a high standard of living. The purpose ofthis chapter is to provide evidence on productivity trends in MENA countries, analyze the determinants of productivity growth in those countries, and study issues related to macroeconomic stability. After studying the productivity of labor in Section 1, Section 2 concentrates on total factor productivity growth, and Section 3 deals with the determinants of total factor productivity growth. While Section 4 considers the effects of infrastructure, Section 5 concentrates on total factor productivity in Turkish manufacturing sub-sectors. Section 6 considers the effects of booms and busts on competitiveness and the chapter concludes with a summary of results.