Many elements of government policy can affect productivity and growth, some directly and some indirectly. In general, investment has a positive effect on both productivity and growth, as when a manufacturing firm builds a new state-of-the-art factory that allows the firm to produce more goods more efficiently.
First, governments set interest rates. While low interest rates enable companies to borrow cheaply and thus invest, which can stimulate growth, this can also give rise to inflation, which can increase costs. Any changes in monetary policy can affect growth and productivity.
Next, rule of law and property rights are important. Governments which are corrupt or which have rapidly changing laws and regulations have a negative impact on growth because companies cannot be assured of the stability of the business environment. Obviously, civic unrest and other political risks also discourage investment, which in turn may depress productivity. Enforcement of intellectual property rights also stimulates research and development, making it worthwhile to invest in, for example, discovering new drugs or new industrial materials.
Educational policy matters because a better-educated workforce is more productive than an uneducated one.
Finally, government policies can affect the ease of doing business. This can include anything from licensing, labor laws, and regulations affecting businesses to tariffs and taxes which can impede global supply chains. The harder it is to do business, the lower productivity will be, because a company will need to invest time and money in struggling with red tape rather than producing goods or services.