Seminario 16/03: – Manuel García-Santana (U. Pompeu Fabra) – Growing like Spain: 1995-2007

Información

Abstract

Spanish GDP grew at an average rate of 3.5% per year during the expansion of 1995- 2007, above the EU average of 2.2%. However, this growth was based on factor accumulation rather than productivity gains. In particular, TFP fell at an annual rate of 0.7%, while it increased at 0.4% in the EU and 0.7% in the US. We argue that deterioration in the allocative efficiency of productive factors across firms is at the root of the low TFP growth in Spain, while misallocation across sectors played only a minor role. Using administrative data of firms we show that within-sector misallocation of production factors increased substantially over the period in all industries, with most of the effects coming from inefficient capital and labor mix rather than inefficient size. We find that absent such deterioration, average TFP growth would have been around 0.8% per year, in line with the growth of the technological frontier. Finally, we provide empirical evidence that differences in the influence of the public sector across industries is a potential source of this deterioration. In contrast, sectoral differences in skill intensity, innovative content, financial dependence, tradability, or capital structures intensity appear to be unrelated to changes in allocative efficiency. We also document that, within industries, young firms were the most affected.