Measuring the efficiency of inputs like labour and capital to a production process has long been recognised as the real driver of growth in an economy. An EU initiative is developing models to enhance such growth accounting.
Economists consider total factor productivity (TFP) an important factor in the process of economic growth. To explain TFP across European economies, it is important to understand how financial development affects investment finance and the ratio of labour and capital for companies based in Europe.
Further details: Model to measure financial development on economic growth