Savings, Investment, Capital to Labour Ratio and Labour Productivity in the European Union over the Period 2000–2022

Abstract

Purpose | This article examines the relationship between savings and labour productivity at a level of generality appropriate to macroeconomic analysis. The aim is to validate the logical connection between these two categories. Research method | The study begins with an analytical approach, using theoretical models to demonstrate how savings are transformed into investment, investment into physical capital, and then – by increasing the capital-labour ratio – into labour productivity growth. These relationships are then verified empirically through correlation and cointegration analysis. Results | The findings confirm the validity of the analytical reasoning. They indicate a logical link between savings and labour productivity at the macroeconomic level, although this link tends to weaken as GDP per capita increases. Originality / value / implications / recommendations | This analysis is diagnostic and cognitive in nature, offering high-level insights into the issue of labour productivity at the national level.