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Paloma Lopez-Garcia
Economics
- Division
Supply Side, Labour and Surveillance
- Current Position
-
Adviser
- Fields of interest
-
Economic Growth,Labour Economics,Other Special Topics
- Other current responsibilities
- 2022-
Team Lead of the Supply Side Team within the Supply Side, Labour and Surveillance Division (DG-Economics, ECB)
- 2022-
Mission Chief of the ECB Nicosia Team
- 2019-
Coordinator, WGF Expert Team on productivity and technological change
- 2017-
Adviser, Competitiveness Research Network
- Education
- 1997-2003
PhD in Economics, London School of Economics and Political Science, London, United kingdom
- 1996-1997
MA in Economics, Universite Catholique de Louvain, Louvain-La-Neuve, Belgium
- 1995-1996
Post-graduate year in Economics, Georgetown University, Washington D.C., United States
- 1990-1995
Bachelor in Economics, Universidad Autonoma de Madrid, Madrid, Spain
- Professional experience
- 2022-
Adviser, Supply Side, Labour and Surveillance, Directorate General Economics, European Central Bank, Frankfurt (Germany)
- 2019-2022
Lead Economist, Supply Side, Labour and Surveillance, Directorate General Economics, European Central Bank, Frankfurt (Germany)
- 2016-2019
Senior Economist, Euro area External Sector Division, Directorate General Economics, European Central Bank, Frankfurt (Germany)
- 2015-2016
Economist, Euro area External Sector Division, Directorate General Economics, European Central Bank, Frankfurt (Germany)
- 2013-2015
Economist (ESCB/IO), Monetary Policy Research Division, Directorate General Research, European Central Bank, Frankfurt (Germany)
- 2004-2013
Economist, Directorate General Economics and Research, Bank of Spain, Madrid (Spain)
- 2004-2004
Research Fellow, Directorate General Economics and Research, Bank of Spain, Madrid (Spain)
- 2004-2004
Short-term consultant, World Bank, Washington D.C. (USA)
- 2003-2004
Research Professor, Instituto de Empresa Business School, Madrid (Spain)
- 2001-2003
Research Fellow, Centre for Economic Studies, Munich (Germany)
- 1997-2002
Research Assistant, London School of Economics, London (UK)
- 1999-2001
Research Assistant at the Global Entrepreneurship Monitor, London Business School, London (UK)
- 1997-1999
Teaching Assistant, London School of Economics, London (UK)
- Teaching experience
- 1997-1999
Econometrics and Introduction to Economics, London School of Economics, United Kingdom
- 18 June 2024
- WORKING PAPER SERIES - No. 2947Details
- Abstract
- This paper studies how the Covid-19 pandemic and the extensive job retention support that accompanied it affected productivity in Europe. The focus is on the reallocation channel and productivity-enhancing reallocation of jobs, following Foster et al., 2016. An extensive micro-distributed analysis of firm-level data for 11 euro area countries is used. The unique firm-level datasets are constructed by merging balance-sheet and income-statement data with policy support data. The paper exploits variation in employment responsiveness to productivity over time, particularly examining the relationship between changes in employment responsiveness and the job retention support in 2020 and studying how well the support was targeted by firm productivity. Acknowledging limitations of a small set of countries covered and occasionally large confidence bounds around estimates, the findings suggest that (1) productivity-enhancing reallocation was weaker in the pandemic than in the Great Recession; (2) The countries that were more generous with job retention support and countries where more support was allocated to low-productivity firms showed weaker productivity-enhancing reallocation in 2020.
- JEL Code
- D22 : Microeconomics→Production and Organizations→Firm Behavior: Empirical Analysis
H25 : Public Economics→Taxation, Subsidies, and Revenue→Business Taxes and Subsidies
J38 : Labor and Demographic Economics→Wages, Compensation, and Labor Costs→Public Policy
L29 : Industrial Organization→Firm Objectives, Organization, and Behavior→Other
- 17 June 2024
- WORKING PAPER SERIES - No. 2946Details
- Abstract
- We examine the extent to which environmental regulation affects innovation and which policy types provide the strongest incentives to innovate. Using a local projection framework, we estimate the regulatory impact on patenting activity over a five-year horizon. As a proxy for environmental policy exposure, we estimate firm-level greenhouse gas emissions using a machine learning algorithm. At the country-level, policy tightening is largely associated with no statistically significant change in environmental technology innovation. At the firm-level, however, environmental policy tightening leads to higher innovation activity in technologies mitigating climate change, while the effect on innovation in other technologies is muted. This suggests that environmental regulation does not lead to a crowding-out of non-clean innovations. The policy type matters, as increasing the stringency of technology support policies and non-market based policies leads to increases in clean technology patenting, while we do not find a statistically significant impact of market-based policies.
- JEL Code
- O44 : Economic Development, Technological Change, and Growth→Economic Growth and Aggregate Productivity→Environment and Growth
Q52 : Agricultural and Natural Resource Economics, Environmental and Ecological Economics→Environmental Economics→Pollution Control Adoption Costs, Distributional Effects, Employment Effects
Q58 : Agricultural and Natural Resource Economics, Environmental and Ecological Economics→Environmental Economics→Government Policy
- 19 March 2024
- ECONOMIC BULLETIN - ARTICLEEconomic Bulletin Issue 2, 2024Details
- Abstract
- Recent shocks such as the pandemic and the energy shock triggered by Russia’s unjustified war against Ukraine have interacted with other structural changes, including the green and digital transitions, leading to an uncertain impact on the medium-term productivity prospects of the euro area. This article summarises the key results of recent work on productivity by a group of experts from the European System of Central Banks (ESCB). The analysis builds on previous work undertaken in the context of the ECB monetary policy strategy review.
- JEL Code
- D24 : Microeconomics→Production and Organizations→Production, Cost, Capital, Capital, Total Factor, and Multifactor Productivity, Capacity
E24 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Employment, Unemployment, Wages, Intergenerational Income Distribution, Aggregate Human Capital
J24 : Labor and Demographic Economics→Demand and Supply of Labor→Human Capital, Skills, Occupational Choice, Labor Productivity
J38 : Labor and Demographic Economics→Wages, Compensation, and Labor Costs→Public Policy
O33 : Economic Development, Technological Change, and Growth→Technological Change, Research and Development, Intellectual Property Rights→Technological Change: Choices and Consequences, Diffusion Processes
O38 : Economic Development, Technological Change, and Growth→Technological Change, Research and Development, Intellectual Property Rights→Government Policy
O47 : Economic Development, Technological Change, and Growth→Economic Growth and Aggregate Productivity→Measurement of Economic Growth, Aggregate Productivity, Cross-Country Output Convergence
Q54 : Agricultural and Natural Resource Economics, Environmental and Ecological Economics→Environmental Economics→Climate, Natural Disasters, Global Warming
Q58 : Agricultural and Natural Resource Economics, Environmental and Ecological Economics→Environmental Economics→Government Policy
- 27 February 2024
- OCCASIONAL PAPER SERIES - No. 341Details
- Abstract
- This paper studies the short-term and long-term consequences of the COVID-19 pandemic for productivity in Europe. Aggregate and sectoral evidence is complemented by firm-level data-based findings obtained from a large micro-distributed exercise. Productivity trends during the COVID-19 pandemic differed from past trends. Labour productivity per hour worked temporarily increased, while productivity per employee declined across sectors given the widespread use of job retention schemes. The extensive margin of productivity growth was muted to some degree by the policy support granted to firms. Firm entries declined while firm exits increased much less than during previous crises. The pandemic had a significant impact on the intensive margin of productivity growth and led to a temporary drop in within-firm productivity per employee and increased reallocation. Job reallocation was productivity-enhancing but subdued compared to the Great Recession. As confirmed by a granular data analysis of the distribution of employment subsidies and loan guarantees and moratoria, job reallocation and also debt distribution and“zombie firm” prevalence were not significantly affected by the COVID-19 policy support. The pandemic and related lockdowns accelerated changes in consumer preferences and working habits with potential long-term effects. Generous government support muted the surge in unemployment and reduced permanent scarring effects.
- JEL Code
- D22 : Microeconomics→Production and Organizations→Firm Behavior: Empirical Analysis
H25 : Public Economics→Taxation, Subsidies, and Revenue→Business Taxes and Subsidies
J38 : Labor and Demographic Economics→Wages, Compensation, and Labor Costs→Public Policy
O47 : Economic Development, Technological Change, and Growth→Economic Growth and Aggregate Productivity→Measurement of Economic Growth, Aggregate Productivity, Cross-Country Output Convergence
- 27 February 2024
- OCCASIONAL PAPER SERIES - No. 340Details
- Abstract
- The impact of climate change on European Union (EU) countries and regions is poised to exhibit considerable diversity, influenced by factors encompassing average temperature, sectoral composition, developmental stages, and adaptation endeavours. The transition towards a more climate-friendly economy demands a well-orchestrated approach to mitigate enduring productivity costs. This shift will have varied implications for businesses, contingent upon their scale, access to financial resources, and capacity for innovation. The formulation of transition policies holds the potential to foster green innovation without displacing other initiatives, yet stringent climate regulations might impede the productivity ascent of pollutant-emitting enterprises. It will thus take time to reap the benefits of innovation. The efficacy of the policy mix is of critical importance in determining the trajectory of success. Market-driven mechanisms exhibit milder distortions compared to non-market-based strategies, though they may not inherently stimulate innovation. Significantly, subsidies earmarked for green research and development (R&D) emerge as a pivotal instrument for fostering innovation, thus constituting a vital component of the policy repertoire during the green transition. The implementation of transition policies will inevitably trigger a substantial reallocation of resources among and within sectors, potentially carrying short-term adverse ramifications. Notably, considerable productivity disparities exist between top and bottom emitters within specific industries. The transition period poses a risk to a substantial proportion of firms and can erode employment opportunities, with a likely decline in new ventures within affected sectors.
- JEL Code
- D24 : Microeconomics→Production and Organizations→Production, Cost, Capital, Capital, Total Factor, and Multifactor Productivity, Capacity
L52 : Industrial Organization→Regulation and Industrial Policy→Industrial Policy, Sectoral Planning Methods
O33 : Economic Development, Technological Change, and Growth→Technological Change, Research and Development, Intellectual Property Rights→Technological Change: Choices and Consequences, Diffusion Processes
O38 : Economic Development, Technological Change, and Growth→Technological Change, Research and Development, Intellectual Property Rights→Government Policy
Q54 : Agricultural and Natural Resource Economics, Environmental and Ecological Economics→Environmental Economics→Climate, Natural Disasters, Global Warming
Q58 : Agricultural and Natural Resource Economics, Environmental and Ecological Economics→Environmental Economics→Government Policy
- 23 May 2023
- WORKING PAPER SERIES - No. 2820Details
- Abstract
- This paper analyses the impact of changes in environmental regulations on productivity growth at country- and firm-level. We exploit several data sources and the environmen-tal policy stringency index, to evaluate the Porter hypothesis, according to which firms’ productivity can benefit from more stringent environmental policies. By using panel local projections, we estimate the regulatory impact over a five-year horizon. The identification of causal impacts of regulatory changes is achieved by the estimation of firms’ CO2 emissions via a machine learning algorithm. At country- and firm-level, policy tightening affects high-polluters’ productivity negatively and stronger than their less-polluting peers. However, among high-polluting firms, large ones experience positive total factor productivity growth due to easier access to finance and greater innovativeness. Hence, we do not find support for the Porter hypothesis in general. However for technology support policies and firms with the required resources, policy tightening can enhance productivity.
- JEL Code
- O44 : Economic Development, Technological Change, and Growth→Economic Growth and Aggregate Productivity→Environment and Growth
Q52 : Agricultural and Natural Resource Economics, Environmental and Ecological Economics→Environmental Economics→Pollution Control Adoption Costs, Distributional Effects, Employment Effects
Q58 : Agricultural and Natural Resource Economics, Environmental and Ecological Economics→Environmental Economics→Government Policy
- 18 January 2023
- THE ECB BLOGDetails
- JEL Code
- E22 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Capital, Investment, Capacity
F34 : International Economics→International Finance→International Lending and Debt Problems
G31 : Financial Economics→Corporate Finance and Governance→Capital Budgeting, Fixed Investment and Inventory Studies, Capacity
G32 : Financial Economics→Corporate Finance and Governance→Financing Policy, Financial Risk and Risk Management, Capital and Ownership Structure, Value of Firms, Goodwill
- 16 November 2022
- WORKING PAPER SERIES - No. 2751Details
- Abstract
- This paper analyses the implications of corporate indebtedness for investment following large economic shocks. The empirical analysis is based on a large Orbis-iBACH firm-level data set for euro area countries from 2005 to 2018. Our results suggest that investment of high-debt firms is significantly depressed for an extended period in the aftermath of economic crises. In the four years after a negative economic shock, the cumulative loss of capital of high-debt firms is around 15% higher than that of firms with lower debt burdens. The negative impact of high debt on investment is most evident for firms in Southern and Eastern Europe and for micro firms. These findings suggest a potentially significant negative impact of increased corporate indebtedness on investment in the post-COVID-19 recovery.
- JEL Code
- E22 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Capital, Investment, Capacity
F34 : International Economics→International Finance→International Lending and Debt Problems
G31 : Financial Economics→Corporate Finance and Governance→Capital Budgeting, Fixed Investment and Inventory Studies, Capacity
G32 : Financial Economics→Corporate Finance and Governance→Financing Policy, Financial Risk and Risk Management, Capital and Ownership Structure, Value of Firms, Goodwill
- 17 February 2022
- ECONOMIC BULLETIN - BOXEconomic Bulletin Issue 1, 2022Details
- Abstract
- This box shows that movements of firms along the productivity distribution over time have played a key role in explaining productivity developments in the euro area. The movement of firms along the productivity distribution is mainly driven by the capacity of firms to react to shocks and by incentives to innovate. This applies to both low-productivity firms that want to survive in the market and high-productivity firms that face the risk of falling behind the times. Interestingly, firm productivity has become less dynamic over time, which may reflect an increase in the average age of frontier firms and declining entry rates in the wake of higher market concentration. This decline in firm dynamism highlights the important role of structural policies in incentivising technological innovation and fostering the market entry of highly productive firms and the exit of less-productive firms.
- JEL Code
- D22 : Microeconomics→Production and Organizations→Firm Behavior: Empirical Analysis
D24 : Microeconomics→Production and Organizations→Production, Cost, Capital, Capital, Total Factor, and Multifactor Productivity, Capacity
E24 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Employment, Unemployment, Wages, Intergenerational Income Distribution, Aggregate Human Capital
D61 : Microeconomics→Welfare Economics→Allocative Efficiency, Cost?Benefit Analysis
- 10 November 2021
- ECONOMIC BULLETIN - BOXEconomic Bulletin Issue 7, 2021Details
- Abstract
- The growth of euro area labour productivity, measured by real GDP per hour worked, increased at the onset of the coronavirus (COVID-19) pandemic before declining during the subsequent economic recovery. This contradicts the general notion of productivity being procyclical and reflects the unique nature of this crisis. This box discusses the recent patterns in labour productivity and considers the extent to which some of these developments might fade or consolidate after the crisis.
- JEL Code
- D22 : Microeconomics→Production and Organizations→Firm Behavior: Empirical Analysis
D24 : Microeconomics→Production and Organizations→Production, Cost, Capital, Capital, Total Factor, and Multifactor Productivity, Capacity
D61 : Microeconomics→Welfare Economics→Allocative Efficiency, Cost?Benefit Analysis
O33 : Economic Development, Technological Change, and Growth→Technological Change, Research and Development, Intellectual Property Rights→Technological Change: Choices and Consequences, Diffusion Processes
O47 : Economic Development, Technological Change, and Growth→Economic Growth and Aggregate Productivity→Measurement of Economic Growth, Aggregate Productivity, Cross-Country Output Convergence
O52 : Economic Development, Technological Change, and Growth→Economywide Country Studies→Europe
- 10 November 2021
- ECONOMIC BULLETIN - ARTICLEEconomic Bulletin Issue 7, 2021Details
- Abstract
- Productivity plays a key role in the economic resilience and social welfare of countries. Central bankers are also interested in higher productivity growth because it would contribute to increasing the natural rate of interest and, therefore, the effectiveness of monetary policy, its room for manoeuvre and its transmission to the economy. With this monetary policy perspective in mind, this article aims to show key productivity trends and drivers over the past few decades in the euro area. The article is complemented by Box 4 in this issue of the Economic Bulletin, which presents preliminary evidence on the impact of the coronavirus (COVID-19) pandemic, and of policy responses to it, on productivity in the euro area.
- JEL Code
- D22 : Microeconomics→Production and Organizations→Firm Behavior: Empirical Analysis
D24 : Microeconomics→Production and Organizations→Production, Cost, Capital, Capital, Total Factor, and Multifactor Productivity, Capacity
D61 : Microeconomics→Welfare Economics→Allocative Efficiency, Cost?Benefit Analysis
O33 : Economic Development, Technological Change, and Growth→Technological Change, Research and Development, Intellectual Property Rights→Technological Change: Choices and Consequences, Diffusion Processes
O47 : Economic Development, Technological Change, and Growth→Economic Growth and Aggregate Productivity→Measurement of Economic Growth, Aggregate Productivity, Cross-Country Output Convergence
O52 : Economic Development, Technological Change, and Growth→Economywide Country Studies→Europe
- 12 October 2021
- OCCASIONAL PAPER SERIES - No. 283Details
- Abstract
- The consensus back in 2008 – ten years after the introduction of the euro – was that the adoption of a common currency had made a limited impact of around 2% in total on the trade flows of the first wave of euro area countries (Baldwin et al., 2008). Since then, six more countries have joined the euro area, and firms have internationalised their production processes. These two phenomena are interrelated and may have changed the way the common currency affects the euro area economy. Therefore, with the common currency now into its third decade – and with more countries queuing to adopt it – this paper revisits the trade effects of the euro, focusing on the newer euro adopters (i.e. those countries that have adopted the euro since 2007) and their interaction with the first wave of euro area members via supply chains. The contribution of the paper is twofold. First, it revisits the estimated aggregate impact of the euro on euro area trade, as well as on trade within and between the two waves of adopters. Data on bilateral flows between 1990 and 2015 for an extended sample of countries to estimate a gravity equation indicate a significant trade impact, ranging between 4.3% and 6.3% in total on average, with the magnitude being the highest for exports from the second wave of adopters to the first wave of adopters. If a synthetic control approach (Abadie and Gardeazabal, 2003; Abadie et al., 2010) is used instead, the estimated gains associated with euro adoption are greater. In particular, exports of both intermediate and final products from countries belonging to the first wave of euro adopters to those belonging to the second wave are estimated to have increased by about 30% using this approach. The second contribution made by this paper relates to the channels through which trade might be affected by a currency union. This question is explored by looking separately at trade in intermediate goods and final products. While we find that trade gains were mainly driven by trade in intermediate goods among countries that adopted the currency earlier (5.3%), our results also show that the euro had a positive effect on the exports of final products from the second wave of adopters to other euro area countries. This effect is as high as 10.6% with the gravity model and 32% with the synthetic control approach. One of the reasons for the difference in the range of estimates between the two approaches might be that the gravity model can control for unobserved characteristics via fixed effects, while the synthetic control approach may fail to do so. These results suggest that the euro facilitated the establishment and expansion of international production chains in Europe. In turn, this is likely to have increased business cycle synchronisation in the euro area and to have supported market access for later adopters.
- JEL Code
- F14 : International Economics→Trade→Empirical Studies of Trade
F15 : International Economics→Trade→Economic Integration
- 21 September 2021
- OCCASIONAL PAPER SERIES - No. 271Details
- Abstract
- This paper analyses the implications of climate change for the conduct of monetary policy in the euro area. It first investigates macroeconomic and financial risks stemming from climate change and from policies aimed at climate mitigation and adaptation, as well as the regulatory and fiscal effects of reducing carbon emissions. In this context, it assesses the need to adapt macroeconomic models and the Eurosystem/ECB staff economic projections underlying the monetary policy decisions. It further considers the implications of climate change for the conduct of monetary policy, in particular the implications for the transmission of monetary policy, the natural rate of interest and the correct identification of shocks. Model simulations using the ECB’s New Area-Wide Model (NAWM) illustrate how the interactions of climate change, financial and fiscal fragilities could significantly restrict the ability of monetary policy to respond to standard business cycle fluctuations. The paper concludes with an analysis of a set of potential monetary policy measures to address climate risks, insofar as they are in line with the ECB’s mandate.
- JEL Code
- E52 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Monetary Policy
E58 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Central Banks and Their Policies
Q54 : Agricultural and Natural Resource Economics, Environmental and Ecological Economics→Environmental Economics→Climate, Natural Disasters, Global Warming
- 21 September 2021
- OCCASIONAL PAPER SERIES - No. 268Details
- Abstract
- The aim of this report is to foster a better understanding of past trends in, and drivers of, productivity growth in the countries of the European Union (EU) and of the interplay between productivity and monetary policy. To this end, a group of experts from 15 national central banks and the European Central Bank (ECB) joined forces and pooled data and expertise for more than 18 months to produce the report. Group members drew on the extensive research already conducted on productivity growth, including within the European System of Central Banks and in the context of the review of the ECB’s monetary policy strategy, and worked together to conduct new analyses.
- JEL Code
- D22 : Microeconomics→Production and Organizations→Firm Behavior: Empirical Analysis
D24 : Microeconomics→Production and Organizations→Production, Cost, Capital, Capital, Total Factor, and Multifactor Productivity, Capacity
D61 : Microeconomics→Welfare Economics→Allocative Efficiency, Cost?Benefit Analysis
O33 : Economic Development, Technological Change, and Growth→Technological Change, Research and Development, Intellectual Property Rights→Technological Change: Choices and Consequences, Diffusion Processes
O47 : Economic Development, Technological Change, and Growth→Economic Growth and Aggregate Productivity→Measurement of Economic Growth, Aggregate Productivity, Cross-Country Output Convergence
O52 : Economic Development, Technological Change, and Growth→Economywide Country Studies→Europe
- 10 November 2020
- ECONOMIC BULLETIN - ARTICLEEconomic Bulletin Issue 7, 2020Details
- Abstract
- The coronavirus (COVID-19) pandemic almost certainly affected potential output negatively via various channels, affecting the trends of total factor productivity, capital and labour. Quantitative estimates show that euro area potential growth will likely stall or even decline in 2020 and the pace of the recovery is highly uncertain, as it depends on whether the shock is temporary or persistent. Comprehensive policy measures are playing a crucial role in preventing hysteresis in the euro area economy and long-term economic scarring.
- JEL Code
- E22 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Capital, Investment, Capacity
E23 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Production
E24 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Employment, Unemployment, Wages, Intergenerational Income Distribution, Aggregate Human Capital
E32 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Business Fluctuations, Cycles
O11 : Economic Development, Technological Change, and Growth→Economic Development→Macroeconomic Analyses of Economic Development
O40 : Economic Development, Technological Change, and Growth→Economic Growth and Aggregate Productivity→General
- 19 June 2019
- OCCASIONAL PAPER SERIES - No. 225Details
- Abstract
- Firms are heterogeneous, even within narrowly defined sectors. This paper surveys the relevant theoretical and empirical literature on firm heterogeneity and external trade. By innovatively exploiting rich cross-country micro-aggregated data sourced from the ECB Competitiveness Research Network (CompNet), this study then investigates the main implications of firm heterogeneity for trade of EU countries, showing a set of stylised facts. On the one hand, exporting firms are larger, more productive and pay higher wages than non-exporting firms. Only these firms are able to bear export costs, related to various factors, such as tariff and non-tariff trade barriers, the quality of the legal system or access to finance. Hence, only few enterprises actually export, and the intensity of aggregate export concentration within few large firms varies across countries and sectors. On the other hand, opening to trade boosts individual firms’ productivity growth, via a number of channels, and also enhances allocative efficiency across firms, in turn increasing aggregate productivity growth. One of the main standard determinants of export growth, namely changes in the real effective exchange rate, impacts aggregate performance differently across countries and sectors, depending on sectoral composition and on firm characteristics within a given sector
- JEL Code
- F14 : International Economics→Trade→Empirical Studies of Trade
L25 : Industrial Organization→Firm Objectives, Organization, and Behavior→Firm Performance: Size, Diversification, and Scope
- 13 June 2019
- OCCASIONAL PAPER SERIES - No. 224Details
- Abstract
- Well-functioning economic structures are key for resilient and prospering euro area economies. The global financial and sovereign debt crises exposed the limited resilience of the euro area’s economic structures. Economic growth was masking underlying weaknesses in several euro area countries. With the inception of the crises, significant efforts have been undertaken by Member States individually and collectively to strengthen resilience of economic structures and the smooth functioning of the euro area. National fiscal policies were consolidated to keep the increase in government debt contained and structural reform momentum increased notably in the second decade, particularly in those countries most hit by the crisis. The strengthened national economic structures were supported by a reformed EU crisis and economic governance framework. However, overall economic structures in euro area countries are still not fully commensurate with the requirements of a monetary union. Moreover, remaining challenges, such as population ageing, low productivity and the implications of digitalisation, will need to be addressed to increase economic resilience and long-term growth.
- JEL Code
- E31 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Price Level, Inflation, Deflation
E32 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Business Fluctuations, Cycles
E60 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→General
E62 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→Fiscal Policy
F10 : International Economics→Trade→General
J11 : Labor and Demographic Economics→Demographic Economics→Demographic Trends, Macroeconomic Effects, and Forecasts
O43 : Economic Development, Technological Change, and Growth→Economic Growth and Aggregate Productivity→Institutions and Growth
- 30 April 2019
- OCCASIONAL PAPER SERIES - No. 221Details
- Abstract
- The studies summarised in this paper focus on the economic implications of euro area firms’ participation in global value chains (GVCs). They show how, and to what extent, a large set of economic variables and inter-linkages have been affected by international production sharing. The core conclusion is that GVC participation has major implications for the euro area economy. Consequently, there is a case for making adjustments to standard macroeconomic analysis and forecasting for the euro area, taking due account of data availability and constraints.
- JEL Code
- F6 : International Economics→Economic Impacts of Globalization
F10 : International Economics→Trade→General
F14 : International Economics→Trade→Empirical Studies of Trade
F16 : International Economics→Trade→Trade and Labor Market Interactions
E3 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles
- 29 November 2018
- WORKING PAPER SERIES - No. 2210Details
- Abstract
- This paper uses cross-country micro-aggregated data on firm dynamics and productivity from the ECB CompNet database to provide empirical evidence on factor reallocation in the European Union (EU). The analysis finds that reallocation is towards more productive firms although the magnitude varies across countries and over time. Variation in reallocation is related to structural differences in firm size distribution across countries as well as to variation in labor and product market institutions. Productivity-enhancing reallocation generally rises in downturns but, similar to findings for the US, it did not pick up in the Great Recession. The sharp drop in exports and tightness in credit markets are seen to provide a partial explanation for this lack of a silver lining.
- JEL Code
- E24 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Employment, Unemployment, Wages, Intergenerational Income Distribution, Aggregate Human Capital
E32 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Business Fluctuations, Cycles
J63 : Labor and Demographic Economics→Mobility, Unemployment, Vacancies, and Immigrant Workers→Turnover, Vacancies, Layoffs
O4 : Economic Development, Technological Change, and Growth→Economic Growth and Aggregate Productivity - Network
- Competitiveness Research Network
- 11 April 2018
- WORKING PAPER SERIES - No. 2143Details
- Abstract
- Using micro-aggregated firm information for nine Central and Eastern European (CEE) countries and data from input-output tables, we examine the role of Global Value Chains (GVCs) for technology diffusion across EU countries. Our empirical results provide support for a two-stage diffusion process of technology across countries. In the first stage, the most productive firms in the host economy benefit from their direct exposure to new technology created in parent firms as a result of their GVC participation. In the second stage, technology spills over to the rest of firms in the host economy via domestic production networks. In addition, we show that the import of intermediate inputs –i.e. backward linkages- is the main channel of technology diffusion within GVCs. We use these results to explain the pronounced post-crisis drop in Total Factor Productivity (TFP) growth in CEE countries. We show that due to their deep integration in GVCs, CEE countries have been exposed to two recent developments highly correlated with their TFP performance: (i) a slowdown in TFP growth of parent firms located in non-CEE EU countries; and (ii) a global slowdown in the growth rate of GVC participation, which is evident also for CEE countries from 2011 onwards. Moreover, we find that the capacity of host firms in CEE countries to absorb and understand new knowledge has decreased since the crisis. We argue that this is related to the drop in R&D investment in the CEE region during the post-crisis period.
- JEL Code
- O33 : Economic Development, Technological Change, and Growth→Technological Change, Research and Development, Intellectual Property Rights→Technological Change: Choices and Consequences, Diffusion Processes
O47 : Economic Development, Technological Change, and Growth→Economic Growth and Aggregate Productivity→Measurement of Economic Growth, Aggregate Productivity, Cross-Country Output Convergence
O57 : Economic Development, Technological Change, and Growth→Economywide Country Studies→Comparative Studies of Countries
C33 : Mathematical and Quantitative Methods→Multiple or Simultaneous Equation Models, Multiple Variables→Panel Data Models, Spatio-temporal Models - Network
- Competitiveness Research Network
- 21 April 2017
- WORKING PAPER SERIES - No. 2048Details
- Abstract
- This paper illustrates the main features of the Labour Module of the CompNet dataset which provides indicators of firm growth over the period 1995-2012 across 17 EU (13 euro area) countries and 9 macro-sectors. It also includes information on a large set of micro-aggregated characteristics of firms growing at different speed such as their financial position and labour and total factor productivity. The paper shows that during the Great Recession the share of shrinking firms sharply increased in countries under stress, while firm growth slowed down in non-stressed countries. In the former, the construction sector suffered the most, while in the latter manufacturing and services related to transportation and storage were mainly affected, possibly as a result of the trade collapse. While we find that, all else equal, more productive firms had a higher probability of growing, the process of productivity-enhancing reallocation was muted during the Great Recession.
- JEL Code
- J23 : Labor and Demographic Economics→Demand and Supply of Labor→Labor Demand
L11 : Industrial Organization→Market Structure, Firm Strategy, and Market Performance→Production, Pricing, and Market Structure, Size Distribution of Firms
L25 : Industrial Organization→Firm Objectives, Organization, and Behavior→Firm Performance: Size, Diversification, and Scope - Network
- Competitiveness Research Network
- 18 November 2016
- WORKING PAPER SERIES - No. 1981Details
- Abstract
- We analyse the evolution of capital and labour (mis)allocation across firms in five euro-area countries (Belgium, France, Germany, Italy and Spain) and eight main sectors of the economy during the period 2002-2012. Three key stylized facts emerge. First, in all countries with the exception of Germany, capital allocation has worsened over time whereas the efficiency of labour reallocation has not changed significantly. Second, the observed increase in capital misallocation has been particularly severe in services as opposed to industry. Third, misallocation of both labour and capital dropped in all countries in 2009 and again for some country-sectors in 2011-2012. We next take stock of the possible drivers of input misallocation dynamics in a standard panel regression framework. Controlling for demand conditions and for the initial level of misallocation, heightened uncertainty, restrictive bank credit standards and tight product and labour market regulation are found to have boosted input misallocation, whereas the Great Recession per se exerted a cleansing effect.
- JEL Code
- D24 : Microeconomics→Production and Organizations→Production, Cost, Capital, Capital, Total Factor, and Multifactor Productivity, Capacity
D61 : Microeconomics→Welfare Economics→Allocative Efficiency, Cost?Benefit Analysis
O47 : Economic Development, Technological Change, and Growth→Economic Growth and Aggregate Productivity→Measurement of Economic Growth, Aggregate Productivity, Cross-Country Output Convergence - Network
- Competitiveness Research Network
- 29 August 2016
- WORKING PAPER SERIES - No. 1950Details
- Abstract
- We investigate the role of corruption in the business environment in explaining the efficiency of within-sector production factor allocation across firms in nine Central and Eastern European countries in the period 2003-2012. Using a conditional convergence model, we find evidence of a positive relationship between corruption growth and both labour and capital misallocation dynamics, once country framework conditions are controlled for: the link between corruption and input misallocation dynamics is larger the smaller the country, the lower the degree of political stability and of civil liberties, and the weaker the quality of its regulations. As input misallocation is one of the determinants of productivity growth, we further show that the relationship between changes in corruption and TFP growth is indeed negative. Our results hold when we tackle a possible omitted variable bias by instrumenting corruption with two instrumental variables (the percentage of women in Parliament and freedom of the press).
- JEL Code
- D24 : Microeconomics→Production and Organizations→Production, Cost, Capital, Capital, Total Factor, and Multifactor Productivity, Capacity
D73 : Microeconomics→Analysis of Collective Decision-Making→Bureaucracy, Administrative Processes in Public Organizations, Corruption
O47 : Economic Development, Technological Change, and Growth→Economic Growth and Aggregate Productivity→Measurement of Economic Growth, Aggregate Productivity, Cross-Country Output Convergence - Network
- Competitiveness Research Network
- 15 July 2015
- OCCASIONAL PAPER SERIES - No. 163Details
- Abstract
- This Compendium describes the contribution of CompNet to the improvement of the analytical framework and indicators of competitiveness. It does this by presenting a comprehensive database of novel competitiveness indicators. These are more than 80 novel indicators designed by CompNet members that capture macro, micro and cross-country dimensions, thus providing a comprehensive view of the competitive position of EU countries and their peers. A short description of each innovative indicator
- JEL Code
- F14 : International Economics→Trade→Empirical Studies of Trade
F41 : International Economics→Macroeconomic Aspects of International Trade and Finance→Open Economy Macroeconomics
F60 : International Economics→Economic Impacts of Globalization→General
D24 : Microeconomics→Production and Organizations→Production, Cost, Capital, Capital, Total Factor, and Multifactor Productivity, Capacity
E31 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Price Level, Inflation, Deflation
- 16 March 2015
- WORKING PAPER SERIES - No. 1764Details
- Abstract
- Drawing from confidential firm-level balance sheets for 17 European countries (13 Euro-Area), the paper documents the newly expanded database of cross-country comparable competitiveness-related indicators built by the Competitiveness Research Network (CompNet). The new database provides information on the distribution of labour productivity, TFP, ULC or size of firms in detailed 2-digit industries but also within broad macrosectors or considering the full economy. Most importantly, the expanded database includes detailed information on critical determinants of competitiveness such as the financial position of the firm, its exporting intensity, employment creation or price-cost margins. Both the distribution of all those variables, within each industry, but also their joint analysis with the productivity of the firm provides critical insights to both policy-makers and researchers regarding aggregate trends dynamics. The current database comprises 17 EU countries, with information for 56 industries, including both manufacturing and services, over the period 1995-2012. The paper aims at analysing the structure and characteristics of this novel database, pointing out a number of results that are relevant to study productivity developments and its drivers. For instance, by using covariances between productivity and employment the paper shows that the drop in employment which occurred during the recent crisis appears to have had
- JEL Code
- L11 : Industrial Organization→Market Structure, Firm Strategy, and Market Performance→Production, Pricing, and Market Structure, Size Distribution of Firms
L25 : Industrial Organization→Firm Objectives, Organization, and Behavior→Firm Performance: Size, Diversification, and Scope
D24 : Microeconomics→Production and Organizations→Production, Cost, Capital, Capital, Total Factor, and Multifactor Productivity, Capacity
O4 : Economic Development, Technological Change, and Growth→Economic Growth and Aggregate Productivity
O57 : Economic Development, Technological Change, and Growth→Economywide Country Studies→Comparative Studies of Countries - Network
- Competitiveness Research Network
- 18 February 2014
- WORKING PAPER SERIES - No. 1634Details
- Abstract
- Drawing from confidential firm-level balance sheets in 11 European countries, the paper presents a novel sectoral database of comparable productivity indicators built by members of the Competitiveness Research Network (CompNet) using a newly developed research infrastructure. Beyond aggregate information available from industry statistics of Eurostat or EU KLEMS, the paper provides information on the distribution of firms across several dimensions related to competitiveness, e.g. productivity and size. The database comprises so far 11 countries, with information for 58 sectors over the period 1995-2011. The paper documents the development of the new research infrastructure, describes the database, and shows some preliminary results. Among them, it shows that there is large heterogeneity in terms of firm productivity or size within narrowly defined industries in all countries. Productivity, and above all, size distribution are very skewed across countries, with a thick left-tail of low productive firms. Moreover, firms at both ends of the distribution show very different dynamics in terms of productivity and unit labour costs. Within-sector heterogeneity and productivity dispersion are positively correlated to aggregate productivity given the possibility of reallocating resources from less to more productive firms. To this extent, we show how allocative efficiency varies across countries, and more interestingly, over different periods of time. Finally, we apply the new database to illustrate the importance of productivity dispersion to explain aggregate trade results.
- JEL Code
- L11 : Industrial Organization→Market Structure, Firm Strategy, and Market Performance→Production, Pricing, and Market Structure, Size Distribution of Firms
L25 : Industrial Organization→Firm Objectives, Organization, and Behavior→Firm Performance: Size, Diversification, and Scope
D24 : Microeconomics→Production and Organizations→Production, Cost, Capital, Capital, Total Factor, and Multifactor Productivity, Capacity
O4 : Economic Development, Technological Change, and Growth→Economic Growth and Aggregate Productivity
O57 : Economic Development, Technological Change, and Growth→Economywide Country Studies→Comparative Studies of Countries - Network
- Competitiveness Research Network
- 10 April 2006
- OCCASIONAL PAPER SERIES - No. 44Details
- Abstract
- This paper analyses the degree of competition in the euro area services sector and its effects on labour productivity and relative prices in that sector over the period 1980-2003. The importance of the euro area services sector has significantly increased over time; it now accounts for around 70% of the euro area's total nominal value added and employment. Labour productivity growth across the euro area services industries appears to be characterised by a high degree of diversity and the level of services inflation is on average higher than aggregate inflation. Investigating several proxies of market competition for the non-financial business services, the paper finds that limited competition in services tends to hamper labour productivity growth in the services sector. Moreover, results tend to suggest that measures aimed at increasing services market competition may have a dampening impact on relative price changes in some services sectors and thus temporarily on aggregate inflation.
- JEL Code
- E : Macroeconomics and Monetary Economics
- 2021
- The Journal of International Trade & Economic DevelopmentFirm heterogeneity and international trade: A cross-country analysis within the EU
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- European Journal of Comparative Economics,Is corruption efficiency-enhancing? A case study of the Central and Eastern European region
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- Economics of Innovation and New TechnologySpillovers and absorptive capacity in the decision to innovate of Spanish firms: the role of human capital
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- Small Business EconomicsWhat makes a high-growth firm? A dynamic probit analysis using Spanish firm-level data
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- El papel de los registros administrativos en el análisis social y económico y el desarrollo del sistema estadísticoAplicación de los registros mercantiles al análisis de la dinámica empresarial en España
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- Entrepreneurship, Industrial Location and Economic GrowthA Comparison of the Determinants of survival of Spanish Firms across Economic Sectors
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- Small Business EconomicsGlobal Entrepreneurship Monitor: Data Collection Design and Implementation 1998–2003
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- European Economic ReviewEntrepreneurship, start-up costs and employment