Total Factor Productivity and the Significance of the Public Sector

Abstract

"It is typical in the modern world that most eco nomic growth is explained by an increase in total fac tor productivity, commonly accompanied by the rise of real capital. After the last financial crisis, Slovenia was specific in the growth of total factor productivity between 2009 and 2019 in that the 44 analyzed in dustries substituted the decline of net real values of fixed capital, associated with a large contraction in bank loans to non-financial corporations. During this period, Slovenia’s total factor productivity strength ened due to increases in innovative potential, human capital (employees with higher education), and the share of foreign trade in Slovenia’s GDP. The public sector played an important role in this, as the increase in innovation potential and human capital was the result of the increase in the real lev el of Slovenian Export and Development Bank loans to enterprises and from extensive EU Structural and Cohesion Funds placements. The growth of inno vation potential was influenced by the rise in the number of full-time researchers, and the increase in human capital was influenced by the economic cli mate in the EU"