Series: Occasional Papers. 2006.
Author: Pilar Cuadrado, Enrique Moral-Benito and Irune Solera.
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Abstract
Income per capita in Spain relative to that of other advanced EU countries held stable at
around 90% from 2000 to 2016. Stagnant labour productivity is at the root of this lack
of convergence. This paper examines these developments from a sectoral perspective
based on recently released EU KLEMS data. Our main findings are as follows: i) Spain
has lower productivity levels vis-à-vis other EU countries in most sectors, with only
4 out of 23 sectors exhibiting higher productivity in Spain: accommodation and food
services, agriculture, electricity and gas supply, and information and communication services;
moreover, the allocation of employment towards low-productivity sectors accounts for
half of the aggregate Spain-EU productivity gap in levels; ii) turning to the changes in the
2000-2016 period, the overall lack of convergence is driven by a divergence in productivity
relative to EU countries, especially within services sectors; iii) while both ICT (Information
and Communication Technology) and non-ICT capital in Spain converged towards
European levels, Total Factor Productivity (TFP) divergence in most sectors explains the
lack of convergence in labour productivity. Finally, we explore one potential explanation for
this pattern: the TFP divergence and ICT capital convergence can be rationalised in the
presence of complementarities between ICT-capital and labour force skills. Indeed, our
industry-country regression analysis suggests that the dismal performance of Spanish
TFP might be related to the significant deficit in the population’s skills as proxied by
PIAAC-OECD scores.