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Average nominal earnings among world countries are very diverse, even within the EU. The disparity between Luxembourg and Bulgaria is almost ten times, as the East European EU Member States considerably lag behind in terms of production of high value-added products. It is important for the East European EU Member States to reduce the disparities, which could be achieved through raising labour productivity, mainly in the tradable sector. The research aim is to identify the effect of an underdeveloped high value-added sector on the low value-added sector in less developed countries. An analysis of empirical data supported the hypothesis that an underdeveloped high value-added tradable subsector in less developed countries does not allow reaching the labour productivity level of developed economies in the low value-added tradable subsector because of the availability of a relatively cheaper labour force that does not force businesses to raise their labour productivity levels.

Effect of an underdeveloped high value-added sector on the low value-added sector in less developed countries