The Relationship Between Internet Connectivity and Labor Productivity : A study on the correlation between Internet connectivity and labor productivity in the European Union

Abstract: The level of labor productivity differs among the European Union countries, especially when you compare a developing country to a more developed country in the EU. This is an issue because the achievement of high labor productivity is a necessary stipulation for a developing economy to realize economic growth and more economic development. On the other hand, the more individuals in an economy with access to the internet (internet connectivity) depicts how developed the economy is in terms of information and communication technology (ICT). Accordingly, the purpose of this paper is to ascertain whether there is a positive relationship between countries having high internet connectivity and labor productivity in the EU. In doing so, Political and entrepreneurial decision-makers can use these findings to decide how much attention or budget to put on the ICT sector to improve labor productivity. To understand the factors that affect labor productivity, Adam Smith and Karl Marx’s theory on labor productivity is used to gain a better understanding. A panel data analysis using a fixed-effect model and pooled OLS regression model is applied in the study to predict the relationship. The result of the study indicates that internet connectivity does not have a significant impact on Labour productivity, or there was not enough evidence showing that they are positively correlated with each other.