DETERMINANTS OF SPATIAL VARIATIONS IN ECONOMIC GROWTH: A GRAVITY MODEL OF THE EU COUNTRIES IN 2000-2021
DETERMINANTS OF SPATIAL VARIATIONS IN ECONOMIC GROWTH: A GRAVITY MODEL OF THE EU COUNTRIES IN 2000-2021

Summary/Abstract: This article presents the results of an assessment of the influence of the capital-labour ratio and total gravity effects on labour productivity. The analysis is based on the gravity model of economic growth wherein the distance is measured using the haversine formula, which makes for an innovative approach to the issue. The analysis covers 27 countries of the European Union from the year 2000 to 2021. The availability of data determined this time range, however, it is sufficient for achieving the objective of the article, that is, capturing the relationship between the labour productivity, gravity effects and the capital-labour ratio. Data was retrieved from the database maintained by the United Nations Economic Commission for Europe. This article puts forward two hypotheses. The first hypothesis is that an increase in the capital-labour ratio has a positive effect on the growth in labour productivity. The second hypothesis assumes that a greater geometric mean of the squares of the distances between the capital city of a European Union country and the capital cities of its neighbours has a negative effect on labour productivity. The research findings confirm both hypotheses, highlighting the significance of the capital-labour ratio's effect on labour productivity.

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