The Effect of Sectoral Employment on Labor Productivity

Abstract

Purpose – The aim of this study is to analyze the relationship between sectoral employment and labor productivity in 32 selected OECD countries covering the years 2005 to 2022.
Design/methodology/approach – The relationship between sectoral employment and labor productivity was tested with panel data analysis.
Results – After deciding on the selection of the model and the basic problems, a positive relationship was found between labor productivity and agricultural and industrial employment rates as a result of the model established with the Parks-Kment estimator. However, it was concluded that there was a negative relationship between labor productivity and the service sector.
Discussion – Since there is a higher effect between labor productivity and agricultural sector employment rates than service and industry employment rates, countries with high agricultural production should follow policies that encourage agriculture and workers in agriculture. Incentives for the industrial sector should also be increased, but service employment should remain in the background in terms of labor productivity.