The determinants of labour productivity in the Eastern Cape Province: A sectoral and industry analysis

Abstract

The purpose of this study is to examine the determinants of labour productivity in the Eastern Cape. Furthermore, the study estimates the determinant of labour productivity from a sectoral and industry perspective. The technique employed for the empirical analysis is the ARDL bounds test. The empirical results highlight that investment in ICT, health and GDP growth are the crucial determinants of total labour productivity in the Eastern Cape. The sectoral analysis shows that primary sector labour productivity is driven by human capital and investment in ICT. Trade is the most important factor explaining labour productivity in the secondary sector while the tertiary sector is driven by R&D expenditures and ICT investment. The industry analysis revealed results similar to those of the sectoral analysis to some extent. The results imply that the shift to a knowledge-based economy is crucial for the Eastern Cape.