The work productivity of the Basque Country is similar to that of Germany
- The Basque Institute of Competitiveness (Orkestra) and the Valencian Institute of Economic Research (Ivie) have released the paper entitled A Model of Regional Growth and Productivity. The case of the Basque Country (Marcial Pons, 2012), which is an in-depth analysis of the Spanish production model and puts forward strategic measures to help to improve its future performance. The authors pay special attention to the performance of the Basque Country, one of the Spanish autonomous communities that has shown a more positive and differentiated productive performance than Spain as a whole in recent years.
- The slow progress of the productivity of the Spanish economy and the increase in the unit labour cost compared to the USA or Germany during the period of economic expansion, along with an inappropriate sectorial specialisation, have been one of the aggravating factors of the Spanish economic crisis.
- While work productivity in the service sector increased significantly in the USA during the boom years, that was not the case in Spain, which meant the negative implications on the progress of the other sectors.
- The Basque Country is one of the Autonomous Communities of Spain that has posted better productive performance. Its work productivity trend is close to that of Germany and better than most of Europe, although both have slid back compared to the United States.
The slow progress in productivity in all sectors during the expansion years, the notable increase in unit labour costs with respect in economic reality of the time, the lack of investment in assets linked to the new Information and Communication Technologies (ICT) and the limited contribution of the service sector to the growth of work productivity are some of the weakness of the Spanish, and the Basque economy although to a lesser extent, to recover from the economic downturn.
These are some of the conclusions of A Model of Regional Productivity and Growth (Marcial Pons, 2012) presented today at the Deusto Business School in Madrid. The presentation was attended by The Minister from the Department for Industry, Trade and Tourism of the Basque Government, Bernabé Unda; The General Manager of the Basque Institute of Competitiveness, José Luis Consejero, and the directors of the research, Matilde Mas, a Full Professor of Economic Analysis at the Universitat de Valencia and Research Profession at the Valencian Institute of Economic Research, and Mikel Navarro, a Full Professor of Economics at Deusto University and Senior Researcher at the Basque Institute of Competitiveness.
The Basque Country: A Model of Economic Growth
Unlike Spain, growth in employment during the years of economic expansion depended less on immigration and was based on other sectorial bases, and work productivity in the Basque Country grew more than in the Spanish case. With the arrival of the economic crisis, the decision was taken to maintain employment levels despite the negative impact on the growth of productivity, particularly in 2009. In terms of investment, as was the case of the rest of the country, it was greater than in Germany, the United States and the rest of the European Union. However, the Basque Autonomous Community opted to invest more in activities linked to the ICT unlike the rest of Spain. Investments were thus made in improving efficiency and in accumulation of ICT capital, particularly in software and hardware. At the same time, the figures show that the workforce in the Basque Country is more qualified than in the rest of the country, which has a positive effect in terms of the competitiveness of the territory.
As regards the implementation of new technologies, the Basque Country, just like the rest of the country, lagged behind in the use of the ICTs with respect to the other countries of the EU-15, even though the situation was more favourable in the Basque case than in the rest of Spain.
From the sectorial productivity perspective, the Basque Country performed better in Spain during the economic expansion and continues to do so, as the most important sectors of the economy of the former are manufacturing and energy. Even though the manufacturing sector has posted losses in recent years, particularly in metallurgy and manufacturing metal products, heavy industry and the production of transport equipment balanced growth in this sector. The neutral contribution of construction of the Basque economy has also contributed to a more favourable performance in terms of productivity with respect to the rest of the country. The weight of the energy sector in the Basque economy has a positive effect on the competitiveness of the territory, as it is current one of the sectors with greatest growth of productivity and the unit labour costs fell sharply during the expansion period.
As is the case in Spain and in the rest of Europe, one of the main weaknesses of the Basque economy is the lack of development of the productivity of the service sector. The weight of this sector is currently lower than in the majority of the countries analysed, due to the great weight of industry, and growth of productivity is lower in a sector that is so important for developed economies. Between 1995 and 2007, the Basque Country dropped thirty percentage points in terms of work productivity in market services with respect to the USA, and Spain was down by twenty. The authors of the book therefore conclude that the emphasis has to be on increasing productivity and the growth of this sector due to its importance in the economy.