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Growing like Spain: 1995-2007

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  • García-Santana, Manuel
  • Moral-Benito, Enrique
  • Pijoan-Mas, Josep
  • Ramos, Roberto

Abstract

Spanish GDP grew at an average rate of 3.5% per year during the expansion of 1995-2007, well above the EU average of 2.2%. However, this growth was based on factor accumulation rather than productivity gains as TFP fell at an annual rate of 0.7%. Using firm-level administrative data for all sectors we show that deterioration in the allocative efficiency of productive factors across firms was at the root of the low TFP growth in Spain, while misallocation across sectors played only a minor role. Cross-industry variation reveals that the increase in misallocation was more severe in sectors where government influence is more important for business success, which represents novel evidence on the potential macroeconomic costs of crony capitalism. In contrast, sectoral differences in financial dependence, skill intensity, innovative content, tradability, or capital structures intensity appear to be unrelated to changes in allocative efficiency. All in all, the observed high output growth together with increasing firm-level misallocation in all sectors is consistent with an expansion driven by a demand boom rather than by structural reforms.

Suggested Citation

  • García-Santana, Manuel & Moral-Benito, Enrique & Pijoan-Mas, Josep & Ramos, Roberto, 2016. "Growing like Spain: 1995-2007," CEPR Discussion Papers 11144, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:11144
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    Cited by:

    1. Juan C. Conesa & Timothy J. Kehoe, 2017. "Productivity, taxes, and hours worked in Spain: 1970–2015," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 8(3), pages 201-223, August.
    2. Cette, Gilbert & Fernald, John & Mojon, Benoît, 2016. "The pre-Great Recession slowdown in productivity," European Economic Review, Elsevier, vol. 88(C), pages 3-20.
    3. Andrea Linarello & Andrea Petrella, 2016. "Productivity and reallocation: evidence from the universe of Italian firms," Questioni di Economia e Finanza (Occasional Papers) 353, Bank of Italy, Economic Research and International Relations Area.
    4. Daniel A Dias & Christine J. Richmond & Carlos Robalo Marques, 2016. "A Tale of Two Sectors; Why is Misallocation Higher in Services than in Manufacturing?," IMF Working Papers 16/220, International Monetary Fund.
    5. Gamberoni, Elisa & Giordano, Claire & Lopez-Garcia, Paloma, 2016. "Capital and labour (mis)allocation in the euro area: some stylized facts and determinants," Working Paper Series 1981, European Central Bank.
    6. Sara Calligaris, 2015. "Misallocation and Total Factor Productivity in Italy: Evidence from Firm-Level Data," CEIS Research Paper 357, Tor Vergata University, CEIS, revised 14 Oct 2015.
    7. Daniela Marconi & Christian Upper, 2017. "Capital Misallocation and Financial Development: A Sector-Level Analysis," Temi di discussione (Economic working papers) 1143, Bank of Italy, Economic Research and International Relations Area.
    8. Bruno Pellegrino & Luigi Zingales, 2017. "Diagnosing the Italian Disease," NBER Working Papers 23964, National Bureau of Economic Research, Inc.
    9. Gita Gopinath & Şebnem Kalemli-Özcan & Loukas Karabarbounis & Carolina Villegas-Sanchez, 2017. "Capital Allocation and Productivity in South Europe," The Quarterly Journal of Economics, Oxford University Press, vol. 132(4), pages 1915-1967.
    10. Sara Calligaris, 2015. "Misallocation and Total Factor Productivity in Italy: Evidence from Firm-Level Data," LABOUR, CEIS, vol. 29(4), pages 367-393, December.
    11. S. Calligaris & M. Del Gatto & F. Hassan & G. I.P. Ottaviano & F. Schivardi, 2017. "The Productivity Puzzle and Misallocation: an Italian Perspective," Working Paper CRENoS 201710, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
    12. Juan J. Dolado & Salvador Ortigueira & Rodolfo Stucchi, 2016. "Does dual employment protection affect TFP? Evidence from Spanish manufacturing firms," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 7(4), pages 421-459, November.
    13. Florian Gerth, 2017. "Allocative efficiency of UK firms during the Great Recession," Studies in Economics 1714, School of Economics, University of Kent.
    14. Miguel Almunia & David López-Rodríguez & Enrique Moral-Benito, 2018. "Evaluating the macro-representativeness of a firm-level database: an application for the Spanish economy," Occasional Papers 1802, Banco de España;Occasional Papers Homepage.
    15. Edouard Challe & Jose Ignacio Lopez & Eric Mengus, 2016. "Southern Europe's institutional decline," Working Papers hal-01331723, HAL.
    16. Gartner, Christine & Giordano, Claire & Lopez-Garcia, Paloma & Gamberoni, Elisa, 2016. "Is corruption efficiency-enhancing? A case study of nine Central and Eastern European countries," Working Paper Series 1950, European Central Bank.
    17. Juan Carlos Conesa & Pau S. Pujolas, 2017. "The Canadian Productivity Stagnation, 2002-2014," Department of Economics Working Papers 2017-04, McMaster University, revised Sep 2017.
    18. Daniel Dias & Carlos Robalo Marques & Christine Richmond, 2016. "Comparing misallocation between sectors in Portugal," Economic Bulletin and Financial Stability Report Articles and Banco de Portugal Economic Studies, Banco de Portugal, Economics and Research Department.
    19. Konstantins Benkovskis, 2015. "Misallocation of Resources in Latvia: Did Anything Change During the Crisis?," Working Papers 2015/05, Latvijas Banka.
    20. Tom Schmitz, 2016. "Endogenous Growth, Firm Heterogeneity and the Long-run Impact of Financial Crises," 2016 Meeting Papers 609, Society for Economic Dynamics.
    21. repec:sls:ipmsls:v:32:y:2017:7 is not listed on IDEAS

    More about this item

    Keywords

    Misallocation; Spain; TFP;

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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