GROWING LIKE SPAIN 1995–2007

Measured total factor productivity (TFP) fell in Spain during the boom years of 1995–2007. Using administrative data from the quasi-universe of firms, we show that there was an increase in misallocation, which was more severe in sectors where connections with public officials are more important for...

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Bibliographic Details
Published in:International economic review (Philadelphia) Vol. 61; no. 1; pp. 383 - 416
Main Authors: García-Santana, Manuel, Moral-Benito, Enrique, Pijoan-Mas, Josep, Ramos, Roberto
Format: Journal Article
Language:English
Published: Philadelphia Wiley 01.02.2020
Blackwell Publishing Ltd
Subjects:
Companies
Economic models
Economic theory
Nepotism
Productivity
Public officials
Spain
ISSN:0020-6598, 1468-2354
Online Access:Get full text
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Summary:Measured total factor productivity (TFP) fell in Spain during the boom years of 1995–2007. Using administrative data from the quasi-universe of firms, we show that there was an increase in misallocation, which was more severe in sectors where connections with public officials are more important for business success. We write and estimate a simple model of cronyism in which heterogeneous firms invest in political connections. Our quantitative exercise concludes that the institutional decline over this period costed 1.9% growth in TFP per year and a 0.8% annual increase in the resources spent by firms in establishing political connections.
Bibliography:We thank John Fernald for sharing the financial intensity data and Eric Bartelsman for a helpful discussion. We also thank seminar participants at 2019 Bellaterra Winter Workshop in Macroeconomics, Banco Central de Chile, Banco de España, CEMFI, EUI, SAEe in Girona, Università Cattolica del Sacro Cuore di Milano, University of Namur, University of Nottingham, and Universidad Pablo Olavide for useful comments. 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. García‐Santana and Pijoan‐Mas acknowledge financial support from the Spanish Ministry of Economy and Competitiveness through, respectively, the Severo Ochoa (SEV–2015–0563) and Maria de Maeztu (MDM–2016–0684) Programmes for Centres of Excellence in R&D.
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ISSN:0020-6598
1468-2354
DOI:10.1111/iere.12427