Growing Like Spain: 1995-2007

46 Pages Posted: 11 May 2016

See all articles by Manuel García-Santana

Manuel García-Santana

Universitat Pompeu Fabra

Enrique Moral-Benito

Banco de España; Universidad Carlos III de Madrid

Josep Pijoan-Mas

Centre for Monetary and Financial Studies (CEMFI); Centre for Economic Policy Research (CEPR)

Roberto Ramos

Banco de España

Multiple version iconThere are 2 versions of this paper

Date Written: May 11, 2016

Abstract

Spanish GDP grew at an average rate of 3.5% per year during the 1995-2007 expansion, 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. We show that within-industry misallocation of production factors increased substantially over the period in all industries. Absent such deterioration, average TFP growth would have been around 0.8% per year, in line with the growth of the technological frontier. Cross-industry variation reveals that the increase in misallocation was more severe in sectors where the incidence of regulations is greater. In contrast, sectoral differences in financial dependence, skill intensity, innovative content, tradability and the intensity of capital structures 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.

Keywords: TFP, misallocation, Spain

JEL Classification: D24, O11, O47

Suggested Citation

García-Santana, Manuel and Moral-Benito, Enrique and Pijoan-Mas, Josep and Ramos, Roberto, Growing Like Spain: 1995-2007 (May 11, 2016). Banco de Espana Working Paper No. 1609. Available at SSRN: https://ssrn.com/abstract=2778521 or http://dx.doi.org/10.2139/ssrn.2778521

Manuel García-Santana (Contact Author)

Universitat Pompeu Fabra ( email )

Enrique Moral-Benito

Banco de España ( email )

Alcala 50
Madrid 28014
Spain

Universidad Carlos III de Madrid ( email )

CL. de Madrid 126
Madrid, Madrid 28903
Spain

Josep Pijoan-Mas

Centre for Monetary and Financial Studies (CEMFI) ( email )

Casado del Alisal 5
28014 Madrid
Spain
+34 91 429 0551 (Phone)
+34 91 429 1056 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Roberto Ramos

Banco de España ( email )

Alcala 50
Madrid 28014
Spain

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