Growing like Spain:

Size: px
Start display at page:

Download "Growing like Spain: 1995-2007"

Transcription

1 Growing like Spain: Manuel García-Santana Université Libre de Bruxelles (ECARES) Enrique Moral-Benito Banco de España Josep Pijoan-Mas CEMFI and CEPR Roberto Ramos Banco de España February 13, 2015 Abstract Spanish GDP grew at an average rate of 3.5% per year during the economic expansion of , which was significantly above the EU average of 2.2%. However, this growth was based on factor accumulation rather than productivity gains. In particular, TFP fell over the period at an annual rate of 0.7%, while it increased at 0.4% per year in the EU and 0.7% per year in the US. Why did Spain fail to benefit from the growth of the technological frontier? In this paper, we argue that deterioration in the allocative efficiency of productive factors across firms is at the root of the low rate of TFP growth observed in Spain. In particular, using administrative data of firms we show that within-sector misallocation of production factors across firms 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, and the role of young and small firms are potential sources of this deterioration in allocative efficiency. In contrast, other characteristics such as skill intensity, innovative content, or financial dependence are unrelated to changes in allocative efficiency. JEL Codes: D24, O11, O47. Keywords: TFP, Misallocation, Spain. The opinions and analyses are the responsibility of the authors and, therefore, do not necessarily coincide with those of the Banco de España or the Eurosystem. We thank John Fernald for sharing the financial intensity data with us. We also thank seminar participants at Banco de España for useful comments. 1

2 1 Introduction The expansion was the longest in Spanish history (see Berge and Jorda 2013). GDP grew at an average 3.5% per year, which compares very favourably to the EU average of 2.2% over the same period. 1 However, Spanish growth during this expansion was based on factor accumulation rather than productivity gains. In particular, annual TFP growth was -0.7%, which is low in comparison to other developed economies such as the US or EU. Such a dismal performance of productivity growth is surprising for a country that is so well integrated in a trade and monetary union with some of the World technology leaders. Did Spain fail to keep up with the technological frontier? In this paper, we argue that the source of negative TFP growth has been the increase in the within-sector misallocation of production factors across firms. We use a large administrative data set of Spanish firms to compute several measures of allocative efficiency for every year between 1995 and In particular, we compute the potential TFP gains due to factor reallocation as Hsieh and Klenow (2009) and the Olley and Pakes (1996) covariances. All measures show a severe deterioration of allocative efficiency over the period. Furthermore, we find the phenomenon to be present in all sectors of activity, which casts doubt on the widespread view that specialization in low productivity sectors such as construction was the main force behind Spanish low TFP growth. We thus argue that allocative efficiency of resources across firms is at the root of the low rates of TFP growth observed in Spain. Our results are very stark: had the level of within-sector allocative efficiency remained constant, TFP growth would have been around 0.8% per year. Therefore, our conclusion is that Spain did not fail to keep up with the technological frontier. Aggregate productivity stagnated because of the economy increasingly allocated capital and labor in the wrong place across firms within each industry. 2 The deterioration of factor allocation across firms during an economic expansion is arguably a singular experience in Spain. Bartelsman et. al. (2013) find that misallocation remained roughly constant over the nineties and early 2000s in several developed countries such as US, UK, Germany or the Netherlands, while it clearly fell for the transitional economies of Central and Eastern Europe. Lewrick et al. (2014) find that improvements in the within-industry allocation of resources is one of the main drivers of aggregate TFP growth in Swiss manufacturing. Using the Hsieh and Klenow 1 EU average refers to the EU15 group, which includes Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Spain, Sweden and the United Kingdom. We take this reference group of developed countries similar to Spain because we have comparable growth accounting data from EU-KLEMS. 2 The prominent role of within industry misallocation as a hindrance to TFP growth has relevant policy implications. For instance, reallocation of workers across industries is generally more costly than reallocation within industries (see e.g. Shin, 1997). 2

3 (2009) framework, Bellone and Mallen-Pisano (2013) find that misallocation remained constant between 1998 and 2005 in France while Dias et al. (2014) show that misallocation increased in Portugal between 1996 and 2011, but this was a period of stagnation in Portugal. In order to shed some light on the potential sources of this phenomenon in Spain, we evaluate the relationship between several sector-specific characteristics and the changes in allocative efficiency. In particular, we find that industries in which the influence of the public sector is larger (e.g. through licensing or regulations) experienced significantly larger increases in misallocation. In contrast, other characteristics such as skill intensity, innovative content or financial dependence are unrelated to changes in allocative efficiency. Turning to firm-specific distortions, we find that small and young firms in Spain might have faced higher market distortions than large and mature firms. As a result, these firms grew less than optimal and operated with capital-labor ratios smaller than optimal (i.e. those observed in the same industries in the US). The rest of the article is organised as follows. Section 2 briefly shows the growth accounting results for Spain and the European Union. Section 3 reviews the theoretical framework of Hsieh and Klenow (2009) and Section 4 describes the data. Then, Section 5 presents the main results regarding the increase in misallocation and Section 6 explores the potential sources of misallocation. Finally, Section 7 concludes. 2 The growth experience The Spanish economy grew by around 3.5% per year between 1995 and This expansion, the longest in the twentieh century, helped Spanish income per capita surpass the EU average in the early 2000s. Growth accounting exercises show that the boom was driven by factor accumulation (labor and capital) rather than increases in productivity. Using data from EU-KLEMS, Figure 1 clearly illustrates this pattern. The labor contribution to output (total hours worked) expanded 3.8 percent a year in This was the result of three main factors: a fast growing working age population, mainly due to migration flows, and an increasing labor force participation rate, mainly reflecting the incorporation of women into the labor market, and a decline of the unemployment rate since the high values achieved in The capital stock also grew at an unprecedented pace of 5.2 percent a year. The rise of the construction sector together with easy borrowing conditions played an important role in the expansion of the capital stock in Spain. Since both labor and capital grew more than final production, total factor productivity (TFP) was reduced by 0.7% per year. These Spanish figures are in sharp contrast to other developed economies. In the average EU country, output growth was 2.2% per year with growth rates of 1.1% and 3.3% for labor and capital 3

4 Figure 1: The Spanish growth experience Production Labor Capital TFP respectively. As a result, TFP growth in the EU was on average 0.4% per year in contrast to the Spanish annual rate of -0.7%. This difference is even more pronounced with respect to the US economy, which experienced TFP growth rates around 0.7% per year over the period. 3 3 Theoretical framework This section presents the model of monopolistic competition with firm heterogeneity a la Melitz (2003) introduced by Hsieh and Klenow (2009) to measure within industry misallocation as a source of differences in aggregate TFP. The crucial characteristic of this model is that firms differ not only in their efficiency levels but also in the capital and output distortions they may face when taking their production decisions. Intuitively, the HK model is charactetized by a closed economy with two primary inputs (capital and labor) and S industries producing differentiated intermediate goods that are combined by a pure assembly sector to produce an homogeneous final good. Firms producing the intermediate differentiated goods operate under monopolistic competition and sell their products to the final good producers. In the absence of distortions, the allocation of resources across firms producing 3 See EU-KLEMS dataset at 4

5 the intermediate goods depends only on physical levels of firm-specific TFP yielding to the optimal level of aggregate TFP. However, the model features firm-specific distortions that preclude firms to optimally choose their levels of output and capital-labor mix, and thus generate within industry misallocation that deviates aggregate TFP from its optimal. More formally, HK assume that there are S different industries in the economy. The output of each of the industries s S is the outcome of aggregating M s differentiated intermediate goods: Y s = ( Ms i=1 ) σ Y σ 1 σ 1 σ si where σ is the elasticity of substitution between goods. Each of these goods is produced by a firm that operates in a monopolistic competitive market and has access to a Cobb-Douglas production function that combines labor and capital: (1) Firms choose labor and capital to maximize profits: Y si = A si K αs si L1 αs si (2) π si = max L si,k si {(1 τ Ysi )P si Y si wl si (1 + τ Ksi )RK si } (3) where τ Ysi and τ Ksi are firm-specific distortions. Notice that τ Ysi distorts the size of the firm, whereas τ Ksi distorts the optimal capital-labor ratio decission. This problem yields the following first order conditions: ( ) σ 1 (1 τ Ysi )P si A si (1 α)l α si Kα si W = 0 (4) σ ( ) σ 1 P si A si αl 1 α si K α 1 si R(1 + τ Ksi ) = 0 (5) σ These two first order conditions imply that the price of firm s output equals a mark-up over the marginal cost: P si = σ ( ) αs ( ) 1 αs R W 1 (1 + τ Ksi )αs σ 1 α s 1 α s A si 1 τ ysi (6) where ( ) σ αs ( ) 1 αs R W 1 (1 τ Ksi ) αs σ 1 α s 1 α s A si (1 τ Ysi ) is its marginal cost. This optimal pricing rule yields labor demand and output that are proportional to the firms physical TFP and the idiosyncratic distortions: 5

6 L si Aσ 1 si (1 τ ysi ) σ (1 τ Ksi ) αs(σ 1) Y si Aσ si(1 τ ysi ) σ (1 τ Ksi ) αsσ and a capital-labor ratio that depends only on the firm s idiosyncratic distortions and relative prices: K si = α s w 1 (7) L si 1 α s R 1 + τ Ksi In the absence of distortions, the allocation of resources across firms depends only on physical levels of firms TFP, yielding to a equalization of capital-labor ratios and marginal revenue products of labor and capital. In the presence of distortions, both capital-labor ratios and total outputs become distorted, generating variation on the marginal revenue products and hence misallocation. 3.1 Within-industry Misallocation Total factor productivity revenue of firm i is defined as: Therefore, substituting equation (6) into equation (8): TFPR si = TFPR si P si A si (8) σ ( ) αs ( ) 1 αs R W (1 + τ Ksi ) αs (9) σ 1 α s 1 α s 1 τ ysi Note that, in the absence of idiosyncratic distortions the TFPR si would equalize across firms operating in the same industry. Suppose, for example, that there is a firm with a relatively high level of physical TFP (A si ). This firm would want to attract labor and capital until reaching the point where its lower price makes its TFPR si the same as the one of less productive firms. In this situation, revenue marginal products of labor and capital are equalized across firms and the first best allocation is achieved. Observed TFP in a given industry is defined as: TFP s = [ Ms i=1 ( ) σ 1 ] 1 σ 1 TFPR s A si TFPR si where TFPR si is the total factor productivity revenue of firm i in industry s defined and TFPR s is the weighted average total factor productivity revenue in industry s. Equation (10) clearly suggests that, conditional on the distribution of firms physical productivity A si, the industry TFP s is maximized 6 (10)

7 when there is no variation in TFPR si across firms. Then, the higher the variation in the firms idiosyncratic distortions, the higher the variation in the within-industry TFPR si, and hence the higher the amount of misallocation. 3.2 Aggregate TFP In the model, there is a single final consumption good produced by a representative firm in a perfectly competitive final good market. This firm combines intermediate goods Y s produced in a finite number of different industries s S. These intermediates are aggregated to produce the final good using a Cobb-Douglas technology: Y = S s=1 Y θs s (11) where S s=1 θ s = 1. The optimization problem of the representative firm implies: P s Y s = θ s Y (12) where P s refers to the price of industry output Y s. The price index P ( ) θs S P s s=1 θ s is set equal to 1. It is important to emphasize that, due to the Cobb-Douglas assumption, the only source of inefficiency in this model is the within-industry misallocation: the increase in an industry s productivity is fully compensated by a the decrease in its price index, so firms idiosyncratic distortions do not affect the sectoral composition of the economy. GDP can be expressed as a function of industries amounts of labor, capital, and TFP s : Y = S s=1 (T F P s Ks αs L αs s ) θs (13) Then, by using equations (10) and (13) the aggregate observed TFP becomes: TFP = S s=1 TFP θs s = S s=1 ( Ms i=1 ( ) σ 1 ) 1 σ 1 TFPR s A θs si (14) TFPR si This expression clearly shows how within-industry misallocation of labor and capital yields a lower measured aggregate TFP. To understand how costly are the idiosyncratic distortions one can define the optimal level of TFP (i.e. the TFP level in the absence of firm-specific distortions): TFP = S s=1 TFP θs s = S s=1 7 ( Ms i=1 ) 1 σ 1 (A si ) σ 1 θs (15)

8 The ratio of optimal TFP to observed TFP (i.e. TFP TFP 1) is the potential TFP gain from reallocation that we will use throughout the paper. In particular, we analyze its evolution over time as an indication of the relevance of changes in within sector misallocation to explain the evolution of aggregate TFP growth in Spain. 3.3 Identification of firm-specific distortions Using the firms optimality conditions we can infer the level of idiosyncratic distortions by picking the values of τ Ksi and τ Ysi that, through the lens of the model, rationalize the combinations of labor, capital, and production that we observe in the data. Aggregate parameters: we follow Hsieh and Klenow (2009) by setting R to 10% (5% interest rate and 5% depreciation rate) and the elasticity of substitution σ to 3. 4 The industry-specific capital shares α s are set to 1 minus the labor share in industry s in the US. Pinning-down firms physical TFP: the expression: For every firm in the data we infer its physical TFP using A si = κ s (P si Y si ) σ σ 1 K αs si L1 αs si 1 where κ s = w1 αs(psys) σ 1 P s is a industry-specific constant. Since it does not affect relative productivities within industry, we set κ s = 1 for all industries. Note that we do not observe firms real output Y si but rather its total revenue P s Y s. We hence use revenue data and the elasticity of substitution σ to infer real output. (16) Pinning-down capital accumulation distortions: Equation (7) pins-down the distortion associated to capital accumulation: The model identifies a high τ Ksi 1 + τ Ksi = α s wl si (17) 1 α s RK si when the ratio of labor to capital compensation is high, relative to what one would expect in the absence of distortions. In a situation in which no firm faces distortions on capital accumulation, we should observe that there is no within-industry variation on the ratio 4 Note that the gains from reallocation increase in σ, and this is a conservative value given that industries are defined at the 4-digit level. Moreover, we later conduct some robustness checks evaluating the importance of this assumption. 8

9 of labor to capital compensation. Through the lens of the model, a relatively high level of labor to capital compensation is associated to the firm facing an idiosyncratic tax distorting its optimal capital-labor ratio. For instance, labor market regulations that result in a high cost of labor only for some firms would be reflected in low τ Ksi for those firms. Conversely, financial markets frictions that raise financial costs for some firms would be reflected in high τ Ksi for those firms. Pinning-down size distortions: After some straightforward manipulation, we can express equation (4) as: (1 τ Ysi ) = σ wl si (18) σ 1 (1 α s )P si Y si This equation pins-down a high τ Ysi when the labor compensation of the firm is low compared to what one would expect given the industry elasticity of output with respect to labor (adjusted for markups). In the presence of distortions, the before-taxes marginal revenue products are not equalized across firms, and hence misallocation arises. Any policy that penalizes firms growth would appear in the form of a high inferred τ Ysi s. 4 Data We use a firm-level dataset containing information of a representative sample of non-financial companies in Spain from 1995 to The sample contains an average number of 497,782 firms per year. This database is named Central Balance Sheet Data (Central de Balances) and is provided by the Banco de España. The database is comprised of two complementary datasets. The first one is based on a standardized voluntary survey handled to companies at the time of requesting compulsory accounting information. Each year around 9,000 companies fill this survey. The information gathered is very detailed, but the sample size is low and big firms are over represented. The second dataset contains the balance sheets of a much larger number of companies. It originates from the firms legal obligation to deposit their balance sheets on the Mercantile Registry. Therefore, coverage is much wider. The Bank of Spain Central Balance Sheet Office is in charge of collecting and cleaning these datasets. All of the variables contained in the second database are also included in the first one. For each firm, we observe its value added, total wage bill, employment, book value of the capital stock (both physical and intangible) and sector of activity at the 4-digit level (according to NACE rev. 2 classification). Since most of the variables are recorded in nominal terms, we employ sector-specific deflators for capital and value added, to compute real values with 2000 as base year. 5 5 The capital deflator is collected from Mas et al. (2013) and the value added deflator is taken from the National 9

10 Panel A of Table 1 illustrates the size distribution of firms in our raw sample for the year The table also compares this distribution with that obtained from the Central Business Register available from the National Statistics Institute. There are two important aspects to highlight. First, the coverage of our raw sample is remarkably large in terms of both the number of firms (56% of the operating firms in Spain) and the level of employment (54% of total employment). Second, our sample provides an excellent representation of the firm size distribution in Spain. In particular, small firms (less than 10 employees) account for 83.90% of the total number of firms and 20.47% of the employment in our sample versus 83.07% and 20.23% in the population. At the other extreme, large firms (more than 200 employees) represent less than 0.5% of the total number of firms both in our sample and in the population, while they account for 33.47% of the employment in our sample and 32.13% in the population. Table 1: Size distribution of firms in our sample and in the census. Central Balance Sheet Dataset Central Business Register Firms Labor Firms Labor Number of employees Total (#) Share (%) Total (#) Share (%) Total (#) Share (%) Total (#) Share (%) PANEL A: Raw Sample , , , ,718, , , , ,050, , , , ,400, , , , ,596, , ,540, , ,728, All 485, ,601, , ,494, PANEL B: Final Sample , , , ,718, , , , ,050, , , , ,400, , , , ,596, , ,528, , ,728, All 327, ,536, , ,494, Notes: Figures refer to the year Self-employed persons are not included. From this original sample we drop observations with missing or non-positive values for the number of employees, value added, or capital stock. We also eliminate observations at the top and bottom 1% of these variables. Since our misallocation measures are computed within each 4-digit industry, we also drop firms belonging to industries with less than 10 firms per year. Therefore, we are left with Accounts. Both deflators are constructed at the 2-digit NACE classification. 10

11 around 350,000 firms per year distributed in digit industries. Turning to this final sample in Panel B of Table 1, our screening strategy slightly over-samples larger firms because small firms with less than 10 employees are more prone to misreport their information in the Mercantile Registries. Note also that our final sample does not include firms with 0 employees because these firms represent mostly firms with no production, created merely for tax purposes. In any event, since those firms account for a small fraction of employment, the representativeness of our final sample in terms of employment remains noticeably good. It is our view that the availability of information on small firms is crucial for measuring within industry misallocation at the 4-digit level as opposed to typical datasets used in the literature that are restricted to samples of larger firms (e.g. with more than 10 or 20 employees). 6 5 Misallocation and productivity in the Spanish boom Our main finding is illustrated in Figure 2. Applying the methodology of Hsieh and Klenow (2009) to our sample of Spanish firms, we find that potential TFP gains from reallocation steadily increased over the period. While TFP could have been around 24% higher in 1995, this figure doubled by These hypothetical increases in the level of aggregate TFP would result from fully equalizing TFPR across firms in each 4-digit sector, i.e., from reallocating resources from firms with low physical TFP towards firms with high TFP. As acknowledged by Hsieh and Klenow (2009), these counterfactuals do not allow for measurement error or model misspecification, which may cast doubt on the usefulness of these numbers without a reference point compare. However, we do not focus on the level but on the change of potential TFP gains relative to the Our implicit assumption is that neither measurement error nor model misspecification have increased over time. In any event, changes in disperion of TFPR might arise from other frictions apart from idiosyncratic distortions of the type embeded in the Hsieh and Klenow (2009) theoretical framework. For instance, overhead labor or quasi-fixed capital (see Bartelsman et al. 2013). Based on Olley and Pakes (1996), we thus explore two covariances as an alternative measures of misallocation. First, we compute a covariance term between firm-specific labor shares and labor productivity; and second 6 The Amadeus database, commercialised by Bureau Van Dyck, also provides firm-level information extracted from firms balance-sheets on a set of variables for all European OECD members including Spain. For instance, Hsieh and Klenow (2014) exploited this dataset. However, Amadeus presents some well-known drawbacks. First, information on employment (typically a non-mandatory item in balance sheets) is only available for 40-50% of the firms in the sample (this implies that although listed in terms of identifier in the Amadeus data, 50-60% of the firms do not provide information about employment). Second, the large attrition bias generates a the lack of representativeness in terms of size (see ECB, 2014). Third, the readily usable version of the Amadeus data currently starts in the year

12 Figure 2: Potential TFP gains from reallocation we compute the covariance between firm-specific production shares and total factor productivity. Under an efficient allocation of resources, more productive firms should produce more and hire more workers. 7 Table 2 summarizes the different measures of misallocation for two sub-periods, namely, and In particular, we use the Hsieh and Klenow (2009) measure of potential TFP gains (labeled as HK) together with the standard deviation of log TFP (labeled as STD), which measures the dispersion of (log) TFPR at the firm level as an alternative measure of misallocation in the HK framework. 8 We also report the two covariance terms as used by Bartelsman et. al. (2013) labeled as OP, one based on labor productivity (LPR) and labor shares, and the other based on total factor productivity (TFP) and production shares. All the statistics in Panel A of Table 2 clearly point to an increase in the degree of misallocation in the Spanish economy over the last expansion as documented in Figure 2. While the dispersion 7 To be more precise, for industry j and year t, the covariance statistic for labor productivity (LPR) is given by: OP j,t = i (θ ij,t θ j,t )(ω ij,t ω j,t ) where i is the firm index, θ ij,t refers to the firm-specific labor share, ω ij,t is the firm-specific labor productivity, and θ j,t and ω j,t are the unweighted averages of industry j. The same covariance can be computed for TFP using firm-specific production shares as originally considered by Olley and Pakes (1996). 8 Under joint log normality of A si, 1 τ Ysi, and 1 + τ Ksi, both measures are equivalent. 12

13 in TFP increased from 0.42 to 0.47, the OP covariance of LPR and labor shares was reduced from 0.30 to 0.21, and the covariance between TFP and production shares moved from 1.59 to This finding is present not only for the aggregate economy but also for the main four the sectors of the economy as shown in Panel B of Table 2. 9 Depending on the misallocation measure considered, the sector with the largest misallocation deterioration is either construction or services. However, the four measures of misallocation point to a deterioration in allocative efficiency in the four sectors. Moreover, Table A1 in Appendix A reports the corresponding results for disaggregated sectors at NACE rev 2-2 digits showing that this deterioration is prevalent among virtually all of the 58 2-digit sectors considered. This fall in the allocative efficiency of production factors is distinctive of the Spanish growth experience. In particular, Bartelsman et. al. (2013) find that misallocation remained roughly constant over the nineties and early 2000s in several developed countries such as US, UK, Germany or the Netherlands, while it clearly fell for the transitional economies of Central and Eastern Europe. Table 2: Misallocation in Spain over the period PANEL A: Total Economy HK STD TFP OP LPR OP TFP PANEL B: By sector HK STD TFP OP LPR OP TFP Manufacturing Construction Trade Services Notes: HK refers to the potential TFP gains if resources were allocated efficiently as proposed by Hsieh and Klenow (2009). OP refers to the Olley and Pakes (1996) covariance term. STD refers to standard deviation as a measure of dispersion. LPR refers to log labor productivity and TFP to log total factor productivity. 9 Note that the sector-specific results are based on misallocation within 4-digit industries aggregated using industry weights. 13

14 We argue that the stark increase in within-sector misallocation over the Spanish boom is at the root of the bad performance of aggregate TFP. We next compute potential TFP growth under the assumption that the level of misallocation remains constant at its 1995 level. This counterfactual exercise provides the aggregate TFP that we would have observed during the expansion without increases in misallocation. To be more precise, we simply multiply the observed aggregate TFP by the year-specific percentage of TFP gains given by the HK exercise above (see Figure 2). Then, we plot the resulting potential TFP growth rates together with the observed ones in Figure 3. Annual growth rates of potential TFP growth would have been between 0.6% and 1.1% with an average of 0.8% under the assumption of constant within-sector misallocation. In contrast, observed TFP growth was -0.7% on average, ranging from -0.8% to -0.5%. Finally, we also compute an alternative counterfectual TFP growth based on aggregating sectorspecific TFP growth rates with weights given by the sector shares in This exercise aims to illustrate the role of between sector misallocation in the evolution of aggregate TFP. While we see that this counterfactual TFP growth is higher than the observed one, it is substantially smaller than the counterfactual based on constant within-sector misallocation. More specifically, it ranges from -0.8% to -0.1% with an average annual growth of -0.4% All in all, these counterfactual excercises speak in favor of the crucial role of within-sector misallocation in the evolution of aggregate TFP in Spain over the last expansion. This finding casts doubt on the traditional view that between-sector misallocation (i.e. specialization in low productivity sectors such as construction) was behind low TFP growth in Spain. 5.1 Robustness analysis Industry classification Our baseline results are based on misallocation within 4-digit industries because the HK theoretical framework relies on the assumption that each industry represents a monopolistic competitive market in which firms produce different varieties of the same intermediate good. Therefore, the greater the level of disaggregation the more plausible this assumption is when taken to the data. However, since the 4-digit level of disaggregation requires very large samples of firms to obtain meaningful figures for more than five hundred industries, we investigate if the deterioration in allocative efficiency documented for Spain at the 4-digit level is also present when considering 2- and 3-digit classifications. Table 3 shows the evolution of allocative inefficiency in Spain in terms of potential TFP gains from reallocation to an efficient allocation of resources across firms within each 4-, 3-, and 2-digit sectors in columns (1), (2) and (3). The increase in TFP gains, or the deterioration in allocative efficiency, is prevalent among all the three industry classifications. Moreover, the increases over the 14

15 Figure 3: Potential TFP growth under 1995 misallocation level Observed TFP growth Potential TFP growth constant misallocation Potential TFP growth constant sector shares whole period are of the same magnitude, around 100% or 8% per year, in all the cases. In particular, the average increases are 8.3, 7.9, and 7.4 percent per year for the exercises at 4-, 3-, and 2-digit industries, respectively Balanced versus unbalanced panel Our baseline sample is an unbalanced panel including firms that might enter or exit at any time. The extensive margin may also play a role in shaping the evolution of allocative efficiency depicted above. However, the potential sources of misallocation might be different depending on the importance of this extensive margin relative to the intensive margin of misallocation of resources within established firms. In order to quantify the importance of the extensive margin in terms of efficient TFP and the evolution of allocative efficiency over time, we consider a balanced panel restricted to firms that were in the sample for the whole period ( ). In the balanced version of the panel we have only 5419 firms per year, which precludes us from considering misallocation within 4-digit industries. Column (4) in Table 3 shows the resulting TFP gains from the balanced panel under the 2-digit disaggregation. We find that the deterioration in allocative efficiency over time still holds, although smaller in size: while the average increase in misallocation is around 7.4% per year when considering the unbalanced panel at the 2-digits level disaggregation, the corresponding figure is 3.3% under the balanced panel. These numbers suggest that about half of the deterioration in allocative efficiency 15

16 is due to the extensive margin Elasticity of substitution As as final robustness test we repeat the exercise with a higher elasticity of substitution: σ=5. This figure is also used by Dias et al. (2014) for Portugal and comes from the estimates for the Eurozone in Christopoulou and Vermeulen (2012). In column (5) of Table 3 we report the results. We find that the magnitude increase in misallocation is preserved. Table 3: Misallocation in Spain over the period Robustness analysis TFP gain from reallocation Baseline 3-digit 2-digit Balanced σ = 5 (1) (2) (3) (4) (5) Notes: Baseline in column (1) refers to our benchmark results based on misallocation within 4-digit industries, σ=3, and the unbalanced panel. Columns (2) and (3) report the results when considering indutries at 3- and 2-digit classifications (NACE 2 rev. 2). Column (4) is based on the balanced version of our panel. Finally, column (5) reports the TFP gains when considering σ=5 instead of σ= Potential TFP gains for the robustness exercises Finally, we also compute the potential TFP growth under the different robustness exercises conducted above. Figure 4 shows the results. In all cases, TFP growth would have been significantly larger than the observed TFP growth. 16

17 Figure 4: Potential TFP growth under 1995 misallocation level Robustness Baseline 2 digits Balanced Observed 6 Sources of misallocation s evolution In the previous sections we have uncovered a large decrease in within-industry allocative efficiency, which we have shown to be the main source of low TFP growth observed over the period in Spain. Given this finding, the challenge is to identify the economic forces that led to the increase in the misallocation of production factors across firms. In this section, we make a first step by providing some descriptive evidence together with some tentative interpretations regarding the potential sources of the Spanish increase in misallocation over the last expansion. In particular, we estimate the relationship between different sector- and firm-specific characteristics with the observed sector and firm-specific changes in allocative efficiency. 6.1 Size versus capital distortions In this section we explore the firm-specific measures of distortions implied by the Hsieh and Klenow (2009) exercise of Section 3. In particular, we have two measures of distortions, one labeled as τ K that distorts the capital-labor ratio, and one labeled as τ Y that distorts the size of the firm. Intuitively, a firm faces a high distortion in the capital-labor ratio (i.e. τ K is high) when the ratio of labor to capital compensation is high relative to what one would expect in the absence of distortions (i.e. when there is no within-industry variation on the ratio of labor to capital compensation). On 17

18 the other hand, a firm faces a high distortion in its size (i.e. a high τ Y ) when it is smaller than it should be, in other words, when the labor compensation of the firm is low compared to what one would expect given the industry elasticity of output with respect to labor. Potential TFP gains increased from around 0.25 in 1995 to around 0.50 in 2007 (see Figure 2). Figure 5 plots the resulting TFP gains when eliminating variation in one distortion at a time. By switching down the capital-labor distortion, i.e., fixing τ Ki = 0 i, TFP gains increased from around 0.01 in 1995 to around 0.03 in Therefore the level of TFP gains due to size distortions is very low. In contrast, the level of TFP gains remain relatively high with an increase from 0.11 in 1995 to 0.20 in 2007 when the size distortion is switched off (i.e. τ Yi = 0 i) and the τ K distortion is present. All in all, the τ K distortion to the capital-labor ratio seems to be the most important distortion in explaining the evolution of aggregate misallocation in Figure 2. Moreover, the interaction between both distortions also explains a significant part of the misallocation level and increase. A possible rationale for this finding is that firms operating with bad input mixes (large capital distortion) also tend to be larger than optimal (large size distortion), worsening the misallocation problem. Indeed, the within industry-year correlation between both distortions is 0.40 in levels and 0.24 in growth rates. Figure 5: Potential TFP gains from reallocation by type of firm-specific distortion No capital distortion No size distortion 18

19 6.2 Sector-level analysis We first analyze the type of sectors in which the deterioration in allocative efficiency between 1995 and 2007 was more pronounced. We have information on several characteristics of 58 sectors at the 2-digit NACE rev. 2 classification (see Table B1 in the Appendix). In order to exploit this information we consider here changes in allocative efficiency at the 2-digit level. 10 Figure 6 plots the level of potential TFP gain from reallocation in 1995 against its change between 1995 and Most of the sectors (51 out of 58) experienced increases in such TFP gains, i.e. deterioration in allocative efficiency, which explains the overall deterioration in Figure 2. In particular, the industries Warehousing and support activities for transportation, Electricity, gas, steam and air conditioning supply, and Activities of head offices; management consultancy activities worsened the most while Manufacture of furniture, Manufacture of beverages, and Motion picture, video and television programme production, sound recording experienced slight improvements in allocative efficiency. Moreover, there is no relationship between the initial level of allocative efficiency and the change over the period. Therefore, we next investigate to what extent observable sector-specific characteristics can generate such differences in allocative efficiency between sectors. In particular, we consider four different dimensions that might be related to the evolution of allocative efficiency. Figure 6: TFP gain and its change by 2-digit sector Change in TFP gain ( ) TFP gain in 1995 by sector (NACE 2 digits) Note that the results are based on misallocation within 4-digit sectors that is aggregated to the 2-digit level using production-based weights as oppossed to computing misallocation within each 2-digit sector. 19

20 First, we explore the role of skill intensity differences across sectors. There are several reasons why this may matter. For instance, firing costs have been long blamed as a possible source of misallocation of workers across firms (see Dolado et al., 2011). Firing costs on open ended contracts are high in Spain. However, the share of employment under flexible fixed-term contracts was large and stable over the period. 11 It has been argued that fixed-term contracts, because they preclude human capital accumulation on the job, are more prevalent among low skilled occupations. Hence, if firing costs are a source of misallocation, we should expect a larger increase in misallocation in high-skill industries. Skill intensity in US sectors is taken as our baseline proxy because it is expected to be exogenous to the evolution of allocative efficiency in Spanish sectors of activity. As a robustness check, we also consider the share of skilled workers in Spain taken from PITEC (Panel de Innovación Tecnológica), which is based on a survey of innovative firms conducted by the National Statistics Institute. 12 Second, differences in external financial dependence across sectors may affect the resource allocation process. The sharp expansion in bank lending during the period originated a stock of loans from credit institutions to non-financial corporations of 90% of GDP in 2007 while it was 38% in The increasing abundance of new credit to firms together with a loose screening process by banks can generate a deterioration in allocative efficiency if bad firms are able to survive hampering the reallocation process towards better firms. In order to check this potential channel, we consider a sector-specific finance intensity variable constructed by Fernald (2014) for the US. Exploiting I-O tables, this finance intensity variable is given by nominal purchases of intermediate financial services as a share of industry gross output. Again, using US sector characteristics ensures exogeneity with respect to the evolution of allocative efficiency in Spanish industries. As an alternative measure of sector-specific financial dependence, we consider the ratio of sector s total liabilities as a percentage of its total assets computed using firm-level data from the Central Balance Sheet Data. Third, more dynamic industries can be expected to produce better allocations of resources. For instance, more innovative sectors have usually larger shares of innovative and young firms that can easily adapt to shifts in demand or actions taken by competitors. Cecchetti and Kharroubi (2012) argue that credit booms (such as the one witnessed in Spain over ) undermine R&D intensive sectors, which might be related to the deterioration in TFP growth. Along these lines, we consider Fernald s (2014) IT intensity variable at the sector level in the US, which consists on the payments for IT as a share of income (taken from the Bureau of Labor Statistics). As an alternative measure of sector-specific IT content, we exploit the Spanish PITEC to construct shares of R&D investment over total investment. 11 The share of fixed-term contract was around 35% of employment in those years, but it witnessed a large increase before See for more details. 20

Growing like Spain: 1995-2007

Growing like Spain: 1995-2007 Growing like Spain: 1995-2007 Manuel García-Santana Université Libre de Bruxelles (ECARES) Enrique Moral-Benito Banco de España Josep Pijoan-Mas CEMFI and CEPR Roberto Ramos Banco de España May 4, 2015

More information

Markups and Firm-Level Export Status: Appendix

Markups and Firm-Level Export Status: Appendix Markups and Firm-Level Export Status: Appendix De Loecker Jan - Warzynski Frederic Princeton University, NBER and CEPR - Aarhus School of Business Forthcoming American Economic Review Abstract This is

More information

What Drives a Successful Fiscal Consolidation?

What Drives a Successful Fiscal Consolidation? What Drives a Successful Fiscal Consolidation? Pablo Hernández de Cos Enrique Moral-Benito May 2012 Abstract Fiscal consolidations are currently in the agenda of fiscal authorities in many countries. Using

More information

HAS FINANCE BECOME TOO EXPENSIVE? AN ESTIMATION OF THE UNIT COST OF FINANCIAL INTERMEDIATION IN EUROPE 1951-2007

HAS FINANCE BECOME TOO EXPENSIVE? AN ESTIMATION OF THE UNIT COST OF FINANCIAL INTERMEDIATION IN EUROPE 1951-2007 HAS FINANCE BECOME TOO EXPENSIVE? AN ESTIMATION OF THE UNIT COST OF FINANCIAL INTERMEDIATION IN EUROPE 1951-2007 IPP Policy Briefs n 10 June 2014 Guillaume Bazot www.ipp.eu Summary Finance played an increasing

More information

Dualization and crisis. David Rueda

Dualization and crisis. David Rueda Dualization and crisis David Rueda The economic crises of the 20 th Century (from the Great Depression to the recessions of the 1970s) were met with significant increases in compensation and protection

More information

The Decline of the U.S. Labor Share. by Michael Elsby (University of Edinburgh), Bart Hobijn (FRB SF), and Aysegul Sahin (FRB NY)

The Decline of the U.S. Labor Share. by Michael Elsby (University of Edinburgh), Bart Hobijn (FRB SF), and Aysegul Sahin (FRB NY) The Decline of the U.S. Labor Share by Michael Elsby (University of Edinburgh), Bart Hobijn (FRB SF), and Aysegul Sahin (FRB NY) Comments by: Brent Neiman University of Chicago Prepared for: Brookings

More information

Export Pricing and Credit Constraints: Theory and Evidence from Greek Firms. Online Data Appendix (not intended for publication) Elias Dinopoulos

Export Pricing and Credit Constraints: Theory and Evidence from Greek Firms. Online Data Appendix (not intended for publication) Elias Dinopoulos Export Pricing and Credit Constraints: Theory and Evidence from Greek Firms Online Data Appendix (not intended for publication) Elias Dinopoulos University of Florida Sarantis Kalyvitis Athens University

More information

Do Currency Unions Affect Foreign Direct Investment? Evidence from US FDI Flows into the European Union

Do Currency Unions Affect Foreign Direct Investment? Evidence from US FDI Flows into the European Union Economic Issues, Vol. 10, Part 2, 2005 Do Currency Unions Affect Foreign Direct Investment? Evidence from US FDI Flows into the European Union Kyriacos Aristotelous 1 ABSTRACT This paper investigates the

More information

The Legal Origins of Corporate Social Responsibility

The Legal Origins of Corporate Social Responsibility The Legal Origins of Corporate Social Responsibility Leonardo Becchetti 1 Rocco Ciciretti 2 Pierluigi Conzo 3 1 University of Rome Tor Vergata 2 University of Rome Tor Vergata, CEIS and RCEA-Rimini 3 University

More information

The Employment Crisis in Spain 1

The Employment Crisis in Spain 1 The Employment Crisis in Spain 1 Juan F Jimeno (Research Division, Banco de España) May 2011 1 Paper prepared for presentation at the United Nations Expert Meeting The Challenge of Building Employment

More information

Financial market integration and economic growth: Quantifying the effects, Brussels 19/02/2003

Financial market integration and economic growth: Quantifying the effects, Brussels 19/02/2003 Financial market integration and economic growth: Quantifying the effects, Brussels 19/02/2003 Presentation of «Quantification of the Macro-Economic Impact of Integration of EU Financial Markets» by London

More information

Gains from Trade: The Role of Composition

Gains from Trade: The Role of Composition Gains from Trade: The Role of Composition Wyatt Brooks University of Notre Dame Pau Pujolas McMaster University February, 2015 Abstract In this paper we use production and trade data to measure gains from

More information

EXTERNAL DEBT AND LIABILITIES OF INDUSTRIAL COUNTRIES. Mark Rider. Research Discussion Paper 9405. November 1994. Economic Research Department

EXTERNAL DEBT AND LIABILITIES OF INDUSTRIAL COUNTRIES. Mark Rider. Research Discussion Paper 9405. November 1994. Economic Research Department EXTERNAL DEBT AND LIABILITIES OF INDUSTRIAL COUNTRIES Mark Rider Research Discussion Paper 9405 November 1994 Economic Research Department Reserve Bank of Australia I would like to thank Sally Banguis

More information

Report on impacts of raised thresholds defining SMEs

Report on impacts of raised thresholds defining SMEs Knowledge creating results--- DG Internal Market Report on impacts of raised thresholds defining SMEs Impact assessment on raising the thresholds in the 4th Company Law Directive (78/660/EEC) defining

More information

An International Look at the Growth of Modern Finance ONLINE APPENDIX

An International Look at the Growth of Modern Finance ONLINE APPENDIX An International Look at the Growth of Modern Finance ONLINE APPENDIX Thomas Philippon and Ariell Reshef April 2013 A Historic finance income share Much of the data on financial intermediation value added

More information

Health Care Systems: Efficiency and Policy Settings

Health Care Systems: Efficiency and Policy Settings Health Care Systems: Efficiency and Policy Settings Summary in English People in OECD countries are healthier than ever before, as shown by longer life expectancy and lower mortality for diseases such

More information

Do Jobs In Export Industries Still Pay More? And Why?

Do Jobs In Export Industries Still Pay More? And Why? Do Jobs In Export Industries Still Pay More? And Why? by David Riker Office of Competition and Economic Analysis July 2010 Manufacturing and Services Economics Briefs are produced by the Office of Competition

More information

FDI as a source of finance in imperfect capital markets Firm-Level Evidence from Argentina

FDI as a source of finance in imperfect capital markets Firm-Level Evidence from Argentina FDI as a source of finance in imperfect capital markets Firm-Level Evidence from Argentina Paula Bustos CREI and Universitat Pompeu Fabra September 2007 Abstract In this paper I analyze the financing and

More information

TheFutureofUnions. Olivier Blanchard. October 2000

TheFutureofUnions. Olivier Blanchard. October 2000 TheFutureofUnions. Olivier Blanchard October 2000 Some institutions die. Some keep being reborn. What will happen to unions? The question is an important one. It is also a tough one. Economists (and others)

More information

Insider Trading Returns: Does Country-level Governance Matter?

Insider Trading Returns: Does Country-level Governance Matter? Svenska handelshögskolan / Hanken School of Economics, www.hanken.fi Insider Trading Returns: Does Country-level Governance Matter? Jyri KINNUNEN Juha-Pekka KALLUNKI Minna MARTIKAINEN Svenska handelshögskolan

More information

THE IMPACT OF MACROECONOMIC FACTORS ON NON-PERFORMING LOANS IN THE REPUBLIC OF MOLDOVA

THE IMPACT OF MACROECONOMIC FACTORS ON NON-PERFORMING LOANS IN THE REPUBLIC OF MOLDOVA Abstract THE IMPACT OF MACROECONOMIC FACTORS ON NON-PERFORMING LOANS IN THE REPUBLIC OF MOLDOVA Dorina CLICHICI 44 Tatiana COLESNICOVA 45 The purpose of this research is to estimate the impact of several

More information

The EU Enlargement, and Immigration from Eastern Europe

The EU Enlargement, and Immigration from Eastern Europe The EU Enlargement, and Immigration from Eastern Europe Olivier Blanchard October 2001 Let me start by sketching a toy model of immigration. Think of all the capital as being in the West (Western Europe).

More information

ANNEX 1 - MACROECONOMIC IMPLICATIONS FOR ITALY OF ACHIEVING COMPLIANCE WITH THE DEBT RULE UNDER TWO DIFFERENT SCENARIOS

ANNEX 1 - MACROECONOMIC IMPLICATIONS FOR ITALY OF ACHIEVING COMPLIANCE WITH THE DEBT RULE UNDER TWO DIFFERENT SCENARIOS ANNEX 1 - MACROECONOMIC IMPLICATIONS FOR ITALY OF ACHIEVING COMPLIANCE WITH THE DEBT RULE UNDER TWO DIFFERENT SCENARIOS The aim of this note is first to illustrate the impact of a fiscal adjustment aimed

More information

4 Distribution of Income, Earnings and Wealth

4 Distribution of Income, Earnings and Wealth 4 Distribution of Income, Earnings and Wealth Indicator 4.1 Indicator 4.2a Indicator 4.2b Indicator 4.3a Indicator 4.3b Indicator 4.4 Indicator 4.5a Indicator 4.5b Indicator 4.6 Indicator 4.7 Income per

More information

General Government debt: a quick way to improve comparability

General Government debt: a quick way to improve comparability General Government debt: a quick way to improve comparability DEMBIERMONT Christian* BIS Bank for International Settlements, Basel, Switzerland Christian.Dembiermont@bis.org In simple words the General

More information

Spillover Effects of a Demand Boom in Northern Europe on Output and Employment in Southern Europe

Spillover Effects of a Demand Boom in Northern Europe on Output and Employment in Southern Europe Spillover Effects of a Demand Boom in Northern Europe on Output and Employment in Southern Europe Oliver Picek 1 Enno Schröder 2 1 The New School for Social Research 2 The New School for Social Research,

More information

VOLUNTARY HEALTH INSURANCE AS A METHOD OF HEALTH CARE FINANCING IN EUROPEAN COUNTRIES

VOLUNTARY HEALTH INSURANCE AS A METHOD OF HEALTH CARE FINANCING IN EUROPEAN COUNTRIES VOLUNTARY HEALTH INSURANCE AS A METHOD OF HEALTH CARE FINANCING IN EUROPEAN COUNTRIES Marta Borda Department of Insurance, Wroclaw University of Economics Komandorska St. No. 118/120, 53-345 Wroclaw, Poland

More information

Determinants of Capital Structure in Developing Countries

Determinants of Capital Structure in Developing Countries Determinants of Capital Structure in Developing Countries Tugba Bas*, Gulnur Muradoglu** and Kate Phylaktis*** 1 Second draft: October 28, 2009 Abstract This study examines the determinants of capital

More information

FROM GOVERNMENT DEFICIT TO DEBT: BRIDGING THE GAP

FROM GOVERNMENT DEFICIT TO DEBT: BRIDGING THE GAP FROM GOVERNMENT DEFICIT TO DEBT: BRIDGING THE GAP Government deficit and debt are the primary focus of fiscal surveillance in the euro area, and reliable data for these key indicators are essential for

More information

An Empirical Analysis of Insider Rates vs. Outsider Rates in Bank Lending

An Empirical Analysis of Insider Rates vs. Outsider Rates in Bank Lending An Empirical Analysis of Insider Rates vs. Outsider Rates in Bank Lending Lamont Black* Indiana University Federal Reserve Board of Governors November 2006 ABSTRACT: This paper analyzes empirically the

More information

Fiscal Consolidation During a Depression

Fiscal Consolidation During a Depression NIESR Fiscal Consolidation During a Depression Nitika Bagaria*, Dawn Holland** and John van Reenen* *London School of Economics **National Institute of Economic and Social Research October 2012 Project

More information

On the Dual Effect of Bankruptcy

On the Dual Effect of Bankruptcy On the Dual Effect of Bankruptcy Daiki Asanuma Abstract This paper examines whether the survival of low-productivity firms in Japan has prevented economic recovery since the bursting of the financial bubble

More information

Social Security Eligibility and the Labor Supply of Elderly Immigrants. George J. Borjas Harvard University and National Bureau of Economic Research

Social Security Eligibility and the Labor Supply of Elderly Immigrants. George J. Borjas Harvard University and National Bureau of Economic Research Social Security Eligibility and the Labor Supply of Elderly Immigrants George J. Borjas Harvard University and National Bureau of Economic Research Updated for the 9th Annual Joint Conference of the Retirement

More information

ECON20310 LECTURE SYNOPSIS REAL BUSINESS CYCLE

ECON20310 LECTURE SYNOPSIS REAL BUSINESS CYCLE ECON20310 LECTURE SYNOPSIS REAL BUSINESS CYCLE YUAN TIAN This synopsis is designed merely for keep a record of the materials covered in lectures. Please refer to your own lecture notes for all proofs.

More information

Do R&D or Capital Expenditures Impact Wage Inequality? Evidence from the IT Industry in Taiwan ROC

Do R&D or Capital Expenditures Impact Wage Inequality? Evidence from the IT Industry in Taiwan ROC Lai, Journal of International and Global Economic Studies, 6(1), June 2013, 48-53 48 Do R&D or Capital Expenditures Impact Wage Inequality? Evidence from the IT Industry in Taiwan ROC Yu-Cheng Lai * Shih

More information

The impact of increased efficiency in the use of energy: A computable general equilibrium analysis for Spain

The impact of increased efficiency in the use of energy: A computable general equilibrium analysis for Spain The impact of increased efficiency in the use of energy: A computable general equilibrium analysis for Spain Pablo Arocena Universidad Pública de Navarra Nafarroako Unibertsitate Publikoa OUTLINE o Motivation:

More information

Measuring the Financing Gap of European Corporations. An Update

Measuring the Financing Gap of European Corporations. An Update Economic and Financial Report 2003/02 Measuring the Financing Gap of European Corporations. An Update Federico Galizia Operations Directorate European Investment Bank 100 Bd Konrad Adenauer L-2950 Luxembourg

More information

THE PERFORMANCE - OF THE UK INLAND MAILS BUSINESS OF CONSIGNIA

THE PERFORMANCE - OF THE UK INLAND MAILS BUSINESS OF CONSIGNIA THE PERFORMANCE - OF THE UK INLAND MAILS BUSINESS OF CONSIGNIA Paper 1 of a series of papers prepared by Consignia in June 2002 for Postcomm s review of the price control for 2003 Summary The overall performance

More information

Reforms, Finance, and Current Accounts

Reforms, Finance, and Current Accounts Università degli Studi di Torino Dipartimento di Economia Cognetti De Martiis Reforms, Finance, and Current Accounts Giuseppe Bertola, Anna Lo Prete Università di Torino Labor market (de)regulation: More/less

More information

Lecture 3: The Theory of the Banking Firm and Banking Competition

Lecture 3: The Theory of the Banking Firm and Banking Competition Lecture 3: The Theory of the Banking Firm and Banking Competition This lecture focuses on the industrial organisation approach to the economics of banking, which considers how banks as firms react optimally

More information

The energy industry and energy price issues in Slovakia during recent years 1

The energy industry and energy price issues in Slovakia during recent years 1 The energy industry and energy price issues in Slovakia during recent years 1 Ing. Mikulá Cár, PhD. National Bank of Slovakia The energy industry and energy prices are becoming a subject of political decisions

More information

72/2015-21 April 2015

72/2015-21 April 2015 72/2015-21 April 2015 Provision of deficit and debt data for 2014 - first notification Euro area and EU28 government deficit at 2.4% and 2.9% of GDP respectively Government debt at 91.9% and 86.8% In 2014,

More information

Current account core-periphery dualism in the EMU. Tatiana Cesaroni (Bank of Italy) and Roberta De Santis (Istat)

Current account core-periphery dualism in the EMU. Tatiana Cesaroni (Bank of Italy) and Roberta De Santis (Istat) Current account core-periphery dualism in the EMU Tatiana Cesaroni (Bank of Italy) and Roberta De Santis (Istat) Motivation (i) starting from the beginning of 90ies Eurozone CA as a whole has remained

More information

Eliminating Double Taxation through Corporate Integration

Eliminating Double Taxation through Corporate Integration FISCAL FACT Feb. 2015 No. 453 Eliminating Double Taxation through Corporate Integration By Kyle Pomerleau Economist Key Findings The United States tax code places a double-tax on corporate income with

More information

Public and Private Sector Earnings - March 2014

Public and Private Sector Earnings - March 2014 Public and Private Sector Earnings - March 2014 Coverage: UK Date: 10 March 2014 Geographical Area: Region Theme: Labour Market Theme: Government Key Points Average pay levels vary between the public and

More information

Mutual Insurance in Figures. Executive summary from the 2007 study produced by AMICE s predecessor association, AISAM

Mutual Insurance in Figures. Executive summary from the 2007 study produced by AMICE s predecessor association, AISAM Mutual Insurance in Figures Executive summary from the 2007 study produced by AMICE s predecessor association, AISAM Disclaimer AISAM 2007 all rights reserved The entire content of this AISAM-statistics

More information

BIS database for debt service ratios for the private nonfinancial

BIS database for debt service ratios for the private nonfinancial BIS database for debt service ratios for the private nonfinancial sector Data documentation The debt service ratio (DSR) is defined as the ratio of interest payments plus amortisations to income. As such,

More information

Figure 1 Statutory corporate income tax rates

Figure 1 Statutory corporate income tax rates Figure 1 Statutory corporate income tax rates 7 6 1982 2001 5 4 3 2 1 Austria Belgium Canada Finland France UK Germany Greece Ireland Italy Japan Netherlands Notes: For countries using different tax rates,

More information

The (mis)allocation of capital

The (mis)allocation of capital The (mis)allocation of capital Abhijit V. Banerjee Esther Duflo Kaivan Munshi September, 2002 Abstract Is capital allocated so that its marginal product is equated to the market interest rate? Is the marginal

More information

Statistics Compendium EBAN 2014. 5.5b

Statistics Compendium EBAN 2014. 5.5b Statistics Compendium EBAN 2014 5.5b The Statistics Compendium is Europe s most extensive annual research on the activity of business angels and business angel networks. It provides information on the

More information

The Elasticity of Taxable Income: A Non-Technical Summary

The Elasticity of Taxable Income: A Non-Technical Summary The Elasticity of Taxable Income: A Non-Technical Summary John Creedy The University of Melbourne Abstract This paper provides a non-technical summary of the concept of the elasticity of taxable income,

More information

What Happens During Recessions, Crunches, and Busts?

What Happens During Recessions, Crunches, and Busts? 9TH JACQUES POLAK ANNUAL RESEARCH CONFERENCE NOVEMBER 13-14, 2008 What Happens During Recessions, Crunches, and Busts? Stijn Claessens International Monetary Fund and Ayhan Kose International Monetary

More information

CREATING AN INNOVATION AGENDA TO GENERATE SUSTAINABLE GROWTH, ENERGY EFFICIENCY AND JOBS IN EUROPE

CREATING AN INNOVATION AGENDA TO GENERATE SUSTAINABLE GROWTH, ENERGY EFFICIENCY AND JOBS IN EUROPE CREATING AN INNOVATION AGENDA TO GENERATE SUSTAINABLE GROWTH, ENERGY EFFICIENCY AND JOBS IN EUROPE BERT COLIJN AND BART VAN ARK NEUJOBS DELIVERABLE NO. 3.9 A discussion brief focusing on: Abstract The

More information

A.2 The Prevalence of Transfer Pricing in International Trade

A.2 The Prevalence of Transfer Pricing in International Trade 19. Transfer Prices A. The Transfer Price Problem A.1 What is a Transfer Price? 19.1 When there is a international transaction between say two divisions of a multinational enterprise that has establishments

More information

Keywords: Overlapping Generations Model, Tax Reform, Turkey

Keywords: Overlapping Generations Model, Tax Reform, Turkey SIMULATING THE TURKISH TAX SYSTEM ADEM İLERİ Middle East Technical University Department of Economics aileri@metu.edu.tr PINAR DERİN-GÜRE Middle East Technical University Department of Economics pderin@metu.edu.tr

More information

FOREIGN TAXES AND THE GROWING SHARE OF U.S. MULTINATIONAL COMPANY INCOME ABROAD: PROFITS, NOT SALES, ARE BEING GLOBALIZED.

FOREIGN TAXES AND THE GROWING SHARE OF U.S. MULTINATIONAL COMPANY INCOME ABROAD: PROFITS, NOT SALES, ARE BEING GLOBALIZED. National Tax Journal, June 2012, 65 (2), 247 282 FOREIGN TAXES AND THE GROWING SHARE OF U.S. MULTINATIONAL COMPANY INCOME ABROAD: PROFITS, NOT SALES, ARE BEING GLOBALIZED Harry Grubert The foreign share

More information

Statistics Netherlands. Macroeconomic Imbalances Factsheet

Statistics Netherlands. Macroeconomic Imbalances Factsheet Macroeconomic Imbalances Factsheet Introduction Since the outbreak of the credit crunch crisis in 2008, and the subsequent European debt crisis, it has become clear that there are large macroeconomic imbalances

More information

Comment On: Reducing Foreclosures by Christopher Foote, Kristopher Gerardi, Lorenz Goette and Paul Willen

Comment On: Reducing Foreclosures by Christopher Foote, Kristopher Gerardi, Lorenz Goette and Paul Willen Comment On: Reducing Foreclosures by Christopher Foote, Kristopher Gerardi, Lorenz Goette and Paul Willen Atif Mian 1 University of Chicago Booth School of Business and NBER The current global recession

More information

11/6/2013. Chapter 16: Government Debt. The U.S. experience in recent years. The troubling long-term fiscal outlook

11/6/2013. Chapter 16: Government Debt. The U.S. experience in recent years. The troubling long-term fiscal outlook Chapter 1: Government Debt Indebtedness of the world s governments Country Gov Debt (% of GDP) Country Gov Debt (% of GDP) Japan 17 U.K. 9 Italy 11 Netherlands Greece 11 Norway Belgium 9 Sweden U.S.A.

More information

EXECUTIVE SUMMARY. Measuring money laundering at continental level: The first steps towards a European ambition. January 2011 EUROPEAN COMMISSION

EXECUTIVE SUMMARY. Measuring money laundering at continental level: The first steps towards a European ambition. January 2011 EUROPEAN COMMISSION MONEY LAUNDERING IN EUROPE Measuring money laundering at continental level: The first steps towards a European ambition EXECUTIVE SUMMARY January 2011 EUROPEAN COMMISSION DG HOME AFFAIRS FIGHT AGAINST

More information

Employment protection and unemployment. Olivier Blanchard * March 1998

Employment protection and unemployment. Olivier Blanchard * March 1998 Employment protection and unemployment Olivier Blanchard * March 1998 The second factor often mentioned in discussions of European unemployment is employment protection (the first, unernploymenr benefits,

More information

FISCAL CONSOLIDATION: HOW MUCH IS NEEDED TO REDUCE DEBT TO A PRUDENT LEVEL?

FISCAL CONSOLIDATION: HOW MUCH IS NEEDED TO REDUCE DEBT TO A PRUDENT LEVEL? Please cite this paper as: OECD (1), Fiscal Consolidation: How Much is Needed to Reduce Debt to a Prudent Level?, OECD Economics Department Policy Notes, No. 11, April. ECONOMICS DEPARTMENT POLICY NOTE

More information

Immigration Reform, Economic Growth, and the Fiscal Challenge Douglas Holtz- Eakin l April 2013

Immigration Reform, Economic Growth, and the Fiscal Challenge Douglas Holtz- Eakin l April 2013 Immigration Reform, Economic Growth, and the Fiscal Challenge Douglas Holtz- Eakin l April 2013 Executive Summary Immigration reform can raise population growth, labor force growth, and thus growth in

More information

Measuring BDC s impact on its clients

Measuring BDC s impact on its clients From BDC s Economic Research and Analysis Team July 213 INCLUDED IN THIS REPORT This report is based on a Statistics Canada analysis that assessed the impact of the Business Development Bank of Canada

More information

Capital Structure and Taxes: What Happens When You (Also) Subsidize Equity?

Capital Structure and Taxes: What Happens When You (Also) Subsidize Equity? June 2013 Capital Structure and Taxes: What Happens When You (Also) Subsidize Equity? Frédéric Panier, Francisco Pérez González y Pablo Villanueva Stanford University Paper Received the Jaime Fernández

More information

The Quality of the Catalan and Spanish Education Systems: A Perspective from PISA

The Quality of the Catalan and Spanish Education Systems: A Perspective from PISA The Quality of the Catalan and Spanish Education Systems: A Perspective from PISA by Antonio Ciccone and Walter Garcia-Fontes* October 2008 * UPF AND ICREA (Ciccone) and UPF (Garcia-Fontes). Executive

More information

Effects of Working Capital Management on Profitability for a Sample of European Firms

Effects of Working Capital Management on Profitability for a Sample of European Firms Effects of Working Capital Management on Profitability for a Sample of European Firms Erasmus University Rotterdam Faculty of Economics of Business Department of Economics Supervisor: S. Gryglewicz Name:

More information

NERI Quarterly Economic Facts Summer 2012. 4 Distribution of Income and Wealth

NERI Quarterly Economic Facts Summer 2012. 4 Distribution of Income and Wealth 4 Distribution of Income and Wealth 53 54 Indicator 4.1 Income per capita in the EU Indicator defined National income (GDP) in per capita (per head of population) terms expressed in Euro and adjusted for

More information

Sources of US Economic Growth, the Role of Information Technology and Sectoral Dispersion*

Sources of US Economic Growth, the Role of Information Technology and Sectoral Dispersion* Sources of US Economic Growth, the Role of Information Technology and Sectoral Dispersion* Martin Fleming January 30, 2001 IBM Corporation 1133 Westchester Avenue White Plains, NY 10604 914-642-3184 fleming1@us.ibm.com

More information

Inflation. Chapter 8. 8.1 Money Supply and Demand

Inflation. Chapter 8. 8.1 Money Supply and Demand Chapter 8 Inflation This chapter examines the causes and consequences of inflation. Sections 8.1 and 8.2 relate inflation to money supply and demand. Although the presentation differs somewhat from that

More information

Methodology Estimates of the Capital Stock of Fixed Assets

Methodology Estimates of the Capital Stock of Fixed Assets Methodology Estimates of the Capital Stock of Fixed Assets The Estimates of the Capital Stock of Fixed Assets are the estimates produced by the Central Statistics Office (CSO) of the stock of fixed assets

More information

Bank survey evidence on bank lending to SMEs in the European Union

Bank survey evidence on bank lending to SMEs in the European Union Economic and Financial Report 2003/01 Bank survey evidence on bank lending to SMEs in the European Union Rien Wagenvoort Economic and Financial Studies European Investment Bank 100, boulevard Konrad Adenauer

More information

Consolidated and non-consolidated debt measures of non-financial corporations

Consolidated and non-consolidated debt measures of non-financial corporations Consolidated and non-consolidated debt measures of non-financial corporations Andreas Hertkorn 1, ECB 2 Abstract: There is a broad consensus to use comprehensive debt measures for the analysis of non-financial

More information

On the Growth Effect of Stock Market Liberalizations

On the Growth Effect of Stock Market Liberalizations On the Growth Effect of Stock Market Liberalizations Nandini Gupta and Kathy Yuan July 2008 Nandini Gupta (Email: nagupta@indiana.edu) is at the Kelley School of Business at Indiana University. Kathy Yuan

More information

Executive Summary In light of the i2010 initiative, the Commission has adopted initiatives to further develop the Single European Information Space a Single Market for the Information Society. However,

More information

11. Internationalisation and firm productivity: firm and regional level effects. Authors Stefan Groot (PBL) Anet Weterings (PBL)

11. Internationalisation and firm productivity: firm and regional level effects. Authors Stefan Groot (PBL) Anet Weterings (PBL) 11. Internationalisation and firm productivity: firm and regional level effects Authors Stefan Groot (PBL) Anet Weterings (PBL) This study analyses the relationship between several dimensions of internationalisation

More information

ICT MICRODATA LINKING PROJECTS. Brian Ring Central Statistics Office

ICT MICRODATA LINKING PROJECTS. Brian Ring Central Statistics Office ICT MICRODATA LINKING PROJECTS Brian Ring Central Statistics Office Some CSO Background CSO runs annual survey of enterprises and households integration work to date has focussed on data from enterprises

More information

Household Finance and Consumption Survey

Household Finance and Consumption Survey An Phríomh-Oifig Staidrimh Central Statistics Office Household Finance and Consumption Survey 2013 Published by the Stationery Office, Dublin, Ireland. Available from: Central Statistics Office, Information

More information

Online Appendix Assessing the Incidence and Efficiency of a Prominent Place Based Policy

Online Appendix Assessing the Incidence and Efficiency of a Prominent Place Based Policy Online Appendix Assessing the Incidence and Efficiency of a Prominent Place Based Policy By MATIAS BUSSO, JESSE GREGORY, AND PATRICK KLINE This document is a Supplemental Online Appendix of Assessing the

More information

INTERNATIONAL COMPARISONS OF PART-TIME WORK

INTERNATIONAL COMPARISONS OF PART-TIME WORK OECD Economic Studies No. 29, 1997/II INTERNATIONAL COMPARISONS OF PART-TIME WORK Georges Lemaitre, Pascal Marianna and Alois van Bastelaer TABLE OF CONTENTS Introduction... 140 International definitions

More information

Internet address: http://www.bls.gov/fls USDL: 04-2343

Internet address: http://www.bls.gov/fls USDL: 04-2343 Internet address: http://www.bls.gov/fls USDL: 04-2343 Technical information: (202) 691-5654 For Release: 10:00 A.M. EST Media contact: (202) 691-5902 Thursday, November 18, 2004 INTERNATIONAL COMPARISONS

More information

Approaches to Stress Testing Credit Risk: Experience gained on Spanish FSAP

Approaches to Stress Testing Credit Risk: Experience gained on Spanish FSAP Approaches to Stress Testing Credit Risk: Experience gained on Spanish FSAP Messrs. Jesús Saurina and Carlo Trucharte Bank of Spain Paper presented at the Expert Forum on Advanced Techniques on Stress

More information

STRUCTURAL CHANGE AND WAGE INEQUALITY: EVIDENCE FROM GERMAN MICRO DATA

STRUCTURAL CHANGE AND WAGE INEQUALITY: EVIDENCE FROM GERMAN MICRO DATA Number 204 April 2014 STRUCTURAL CHANGE AND WAGE INEQUALITY: EVIDENCE FROM GERMAN MICRO DATA Philipp Henze ISSN: 1439-2305 Structural Change and Wage Inequality: Evidence from German Micro Data Philipp

More information

Broadband and i2010: The importance of dynamic competition to market growth

Broadband and i2010: The importance of dynamic competition to market growth Broadband and i2010: The importance of dynamic competition to market growth Richard Cadman & Chris Dineen 21 February 2005 Strategy and Policy Consultants Network Ltd Chapel House Booton Norwich NR10 4PE

More information

Macroeconomic Effects of Financial Shocks Online Appendix

Macroeconomic Effects of Financial Shocks Online Appendix Macroeconomic Effects of Financial Shocks Online Appendix By Urban Jermann and Vincenzo Quadrini Data sources Financial data is from the Flow of Funds Accounts of the Federal Reserve Board. We report the

More information

The Determinants and the Value of Cash Holdings: Evidence. from French firms

The Determinants and the Value of Cash Holdings: Evidence. from French firms The Determinants and the Value of Cash Holdings: Evidence from French firms Khaoula SADDOUR Cahier de recherche n 2006-6 Abstract: This paper investigates the determinants of the cash holdings of French

More information

EUROPEAN SEMESTER THEMATIC FICHE ACCESS TO FINANCE

EUROPEAN SEMESTER THEMATIC FICHE ACCESS TO FINANCE EUROPEAN SEMESTER THEMATIC FICHE ACCESS TO FINANCE Access to finance is key to business development. Investment and innovation are not possible without adequate financing. A difficulty in getting finance

More information

International Labor Comparisons

International Labor Comparisons Charting International Labor Comparisons 2010 Edition U.S. Department of Labor Material contained in this document is in the public domain and may be reproduced, fully or partially, without permission

More information

QUARTERLY JOURNAL OF ECONOMICS

QUARTERLY JOURNAL OF ECONOMICS THE QUARTERLY JOURNAL OF ECONOMICS Vol. CXXIV November 29 Issue 4 MISALLOCATION AND MANUFACTURING TFP IN CHINA AND INDIA CHANG-TAI HSIEH AND PETER J. KLENOW Resource misallocation can lower aggregate total

More information

DOES COMMERCIAL BANK LENDING INCITE GROWTH? THE IMPACT OF COMMERCIAL LENDING ON REAL SECTOR GROWTH IN NIGERIA

DOES COMMERCIAL BANK LENDING INCITE GROWTH? THE IMPACT OF COMMERCIAL LENDING ON REAL SECTOR GROWTH IN NIGERIA DOES COMMERCIAL BANK LENDING INCITE GROWTH? THE IMPACT OF COMMERCIAL LENDING ON REAL SECTOR GROWTH IN NIGERIA Paul Ojeaga Bergamo University, Italy paul.ojeaga@unibg.it Omosefe Odejimi Igbinedion University

More information

IW Monetary Outlook December 2015

IW Monetary Outlook December 2015 IW policy paper 37/2015 Contributions to the political debate by the Cologne Institute for Economic Research IW Monetary Outlook December 2015 Weak Credit Growth Hinders Eurozone Inflation to Increase

More information

PUBLIC DEBT SIZE, COST AND LONG-TERM SUSTAINABILITY: PORTUGAL VS. EURO AREA PEERS

PUBLIC DEBT SIZE, COST AND LONG-TERM SUSTAINABILITY: PORTUGAL VS. EURO AREA PEERS PUBLIC DEBT SIZE, COST AND LONG-TERM SUSTAINABILITY: PORTUGAL VS. EURO AREA PEERS 1. Introduction This note discusses the strength of government finances in, and its relative position with respect to other

More information

The Legal Protection Insurance Market in Europe. October 2013

The Legal Protection Insurance Market in Europe. October 2013 The Legal Protection Insurance Market in Europe October 2013 The Legal Protection Insurance Market in Europe October 2013 In its latest publication RIAD, the International Association of Legal Protection

More information

Income and the demand for complementary health insurance in France. Bidénam Kambia-Chopin, Michel Grignon (McMaster University, Hamilton, Ontario)

Income and the demand for complementary health insurance in France. Bidénam Kambia-Chopin, Michel Grignon (McMaster University, Hamilton, Ontario) Income and the demand for complementary health insurance in France Bidénam Kambia-Chopin, Michel Grignon (McMaster University, Hamilton, Ontario) Presentation Workshop IRDES, June 24-25 2010 The 2010 IRDES

More information

Alcohol Consumption in Ireland 1986-2006 A Report for the Health Service Executive

Alcohol Consumption in Ireland 1986-2006 A Report for the Health Service Executive Alcohol Consumption in Ireland 1986-2006 A Report for the Health Service Executive Prepared by Dr. Ann Hope This report should be referenced: Hope, A. (2007). Alcohol consumption in Ireland 1986-2006.

More information

CPB Discussion Paper 250. The Effects of Outsourcing on Firm Productivity Evidence from Microdata in the Netherlands. Jan Möhlmann Henri L.F.

CPB Discussion Paper 250. The Effects of Outsourcing on Firm Productivity Evidence from Microdata in the Netherlands. Jan Möhlmann Henri L.F. CPB Discussion Paper 250 The Effects of Outsourcing on Firm Productivity Evidence from Microdata in the Netherlands Jan Möhlmann Henri L.F. de Groot The effects of outsourcing on firm productivity Evidence

More information

Efficiency Analysis of Life Insurance Companies in Thailand

Efficiency Analysis of Life Insurance Companies in Thailand Efficiency Analysis of Life Insurance Companies in Thailand Li Li School of Business, University of the Thai Chamber of Commerce 126/1 Vibhavadee_Rangsit Rd., Dindaeng, Bangkok 10400, Thailand Tel: (662)

More information

EIOPA Stress Test 2011. Press Briefing Frankfurt am Main, 4 July 2011

EIOPA Stress Test 2011. Press Briefing Frankfurt am Main, 4 July 2011 EIOPA Stress Test 2011 Press Briefing Frankfurt am Main, 4 July 2011 Topics 1. Objectives 2. Initial remarks 3. Framework 4. Participation 5. Results 6. Summary 7. Follow up 2 Objectives Overall objective

More information

The wine market: evolution and trends

The wine market: evolution and trends The wine market: evolution and trends May 2014 1 Table of contents 1. WINE CONSUMPTION 3 2. TRENDS IN WORLD WINE TRADE IN 20 6 3. TOP WINE EXPORTERS IN 20 7 4. TOP WINE IMPORTERS IN 20 9 5. THE FIVE LARGEST

More information

Insurance corporations and pension funds in OECD countries

Insurance corporations and pension funds in OECD countries Insurance corporations and pension funds in OECD countries Massimo COLETTA (Bank of Italy) Belén ZINNI (OECD) UNECE, Expert Group on National Accounts, Geneva - 3 May 2012 Outline Motivations Insurance

More information