Impact of Labour on Economic Growth in Bulgaria (1991 - 2013)

Abstract

The paper studies empirically the impact of labour on the economic growth in Bulgaria by applying the growth accounting approach. It examines the relationship between labour growth and real GDP growth measured through their rates on a constant and on a chain basis. The labour elasticity coefficient in the production function is calculated by substantiating four alternative approaches. Based on the different elasticity coefficient variants and the data on employment dynamics, the range of impact of labour on the realised rates of economic growth is weighed. On the basis of the outcomes of the investigation a conclusion is reached that real GDP growth in the period 1994- 1995 and 2002-2008 was under the positive and changeable over time impact of employment which, except for 1995, was weaker than the impact from developments in capital and total factor productivity. The effect from labour developments is most pronounced in episodes of negative or low positive rates of real GDP growth as was the case in 1992-1993, 1997 and the post-2009 interval, and is strongly negative. A similar negative effect is also observed in the period 1998-2000, however weaker compared to the consequences from developments in the rest of the supply-driven growth factors. The negative impact of employment on real GDP growth typical of the post-2009 period is symptomatic that growth acceleration is possible through an active policy promoting employment.