A quantitative analysis of the European construction sector: productivity, investment, and competitiveness

The construction industry is a key sector in the European economy. It provides infrastructure necessary for the development of numerous other productive sectors, and it is significant both in terms of employment and value added. However, the construction industry remains structurally weak as it is characterized by the presence of small firms, low technology content and a high intensity of labor relative to capital. Over time, this has led to a labor productivity below the national and European average, and to a limited capacity for innovation, both in terms of products and processes. In this paper, we use Eurostat macroeconomic data for the EU 28 to document these asymmetric dynamics. From the analysis, it emerges the competitive gap of the Italian construction industry compared to the similar European dynamics. In addition, we use Amadeus Bureau van Dijk balance sheet data to calculate productivity, markup and an appropriate measure of technology progress, estimating the so-called total factor productivity (TFP) for the industry, in six European countries for the period 2011-2019. TFP is an overall measure of technology productivity, a key driver of long-term economic growth. The markup provides information on the degree of competitiveness of the sector. The analysis reveals the need to increase the technology and innovation content of the construction industry in order to sustain productivity, competitiveness and wages. Finally, it emerges the need to design new rules and industrial relations, at national and European level, to facilitate the recovery of the construction sector.