DETERMINANTS OF TOTAL FACTOR PRODUCTIVITY IN THE EUROPEAN UNION

As the productivity in the European Union's member states is continuosly declining, an interesting question arises. Which factors are responsible for this unfavourable development? The aim of this paper is to identify the most significant determinants of the Total Factor Productivity growth in the European Union. Applying different development theories, we consider 5 groups of possible determinants. We use Bayesian Model Averiging method to overtake a problem with model uncertainty. The analysis is executed on yearly observations for 19 member states of the European union covering the period from 1995 to 2013. The result suggest that the most robust determinants are conditions on labour market, infrastructure investments and structural factors.