THE PRODUCTIVITY SPILLOVERS AS THE SOURCE OF ECONOMIC GROWTH - AN EMPIRICAL ANALYSIS WITH EUROPEAN UNION COUNTRIES' DATA

The purpose of this paper is to test to what extent an economic growth can be attributed to the international knowledge spillovers. The knowledge spillover is related to the possible output growth gains from the total factor productivity increase in other countries. Analysis of growth accounting was based on the production function of neoclassical growth model. The augmented production function accounted for the labour, physical and human capital, and also captured the other country's total factor productivity growth variable. An empirical investigation was based on the annual data of national accounts of the eighteen European Union countries for the period from 2005 to 2012. The extent, to which variations of productivity can be explained by the production factors of physical and human capital, and the inter-country productivity spillovers, is estimated from the regression analysis. The results reveal, that augmented neo-classical growth model explains considerable part of productivity growth. The regression coefficients of capital labour ratio and human capital inputs are highly significant. The estimated regression coefficient for the variable of total factor productivity growth in Germany was found significant but low in value. The estimate supports the idea, that economic growth of European Union countries can be attributed to the international knowledge spillover, associated to the productivity increase in German economy.