Title: Growth and Wellbeing in the Long-run: Spain in the Italian Mirror
1Growth and Wellbeing in the Long-run Spain in
the Italian Mirror
- by Leandro Prados de la Escosura(Universidad
Carlos III, Madrid) - Banca dItalia, Roma, 9 November 2011
2Trends in Real Output per Head in Preindustrial
Spain (11-year moving averages) (1850/59 100)
logs
3Growth of Output per Head ()
4Spain and Italy Real Output per Head, 1280-1850
(1850/59 100) (11-year moving averages) (logs)
5Spains Italys Mirror Image
- Italy In phases of demographic stagnation or
decline, -gt population pressure on resources
relaxes gt improvement in per capita income - Spainunder sluggish or negative population
growth gt falling output per head (and vice
versa) - gt a frontier economy up to the 16th century
- - 1600 onwards, crops expanded at the expense of
pasture
6Spain and Italy in European Perspective Per
Capita GDP Levels (U.K. 1850 100) (1990 G-K )
7The Early 19th Century A Turning Point in Spain
- Population increase
- Agricultural productivity growth
- Urbanization
- New institutional framework
- GDP per head growth despite the loss of empire
- But relative decline
8Real Per Capita GDP, 1850-2007
9Long-term Growth, 1850-2007 New Evidence
- Real GDP multiplied by 57
- Real GDP per head by 19
- Three main phases of growth
- 1850-1950
- 1951-1974
- 1975-2007
-
- Continuity over 1850-1950 View of 19th C failure
and 20th C success, rejected
10Phases of Economic Growth 1850-2007 ()
11GDP Growth Decomposition, 1850-2007 ()
12Long Swings (1850-2007)
- Long swings differ from trend growth due to
economic policy, international integration and
technological changes - 1850-83 Acceleration Reconstruction, openness,
capital inflows -
- 1883-1920 Deceleration Stability but isolation
-
- 1920-29 Acceleration Govt intervention and
capital inflow -
- 1929-52 Depression, Civil War, Autarchy
- 1952-58, Growth with hardly any institutional
change - 1958-74, Accelerated growth and cautious opening
up - 1974-86, Deceleration the costs of the
transition to democracy - 1986-2007, Growth recovered after accession to
European Union
13Spains Relative Per Capita GDP () (2005 EKS )
14Growing up, Falling Behind, Catching Up
- 1810-1850, economic activity grew faster than
population, but slow per capita income (0.4 )
gt Retardation - 1850s-1914, per capita GDP growth parallel to a
widening gap with the Core gt Growth and
backwardness paradox -
- World Wars sluggish growth and backwardness
- 1920s dynamism and a mild Great Depression,
more
than offset by the Civil War - Late 20th century Growth and Catching-up
but not convergence
15Whats behind GDP per Head?
- GDP per capita GDP/hour x Hours/person
- Long-run labour productivity growth (1920s,
1953-1986) - Hours per person long-term decline
- From 1975 onwards labour quantity and
productivity, evolved inversely - - 1975-86 employment destruction,
more than offset by a productivity
surge - - 1987-2007 productivity slowdown,
offset by the increase in hours worked - opposite trends in GDP per head and per hour
worked
16GDP per Person and per Hour, 1850-2007
17Per Capita GDP Growth Decomposition ()
18Per Capita GDP Growth Decomposition ()
19Italy Per Capita GDP Growth Decomposition ()
20Labour Productivity and Structural Change (upper
bound)
21Italy Labour Productivity and Structural Change
(upper bound)
22Main Comparative Results
- Italy BGZ (2011)
- Modest growth prior to WWII
but spurts in 1880-1913 and 1938-51 - Golden Age acceleration productivity growth
across the board structural change - Productivity slowdown since 1993 the role of
services - Spain
- Mild pre-1950 productivity growth structural
change(except 1920s) - Acceleration 1953-86 the Golden Age and
Transition - Dramatic slowdown since 1986 (EU accession)
23Hours Worked per Occupied-Year, 1850-2007
24Italy Hours worked per occupied-year, 1861-2011
25Determinants of Labour Productivity
- Physical capital per occupied (hour)
- Human capital per occupied (hour)
- Efficiency gains (PTF)
26Capital Input Growth Rate ()
27Composition of Capital Stock in Spain () (1995
Pesetas)
28Italy Composition of Capital Stock ()
29Labour Quantity (hours worked) Growth Rate ()
30Capital Deepening Growth Rate ()
31Human Capital Alternative Measures
- Education based(Mincer)
- Educational levels (years of schooling) weighted
by education returns - It does not consider other forms of human capital
- Income based(Jorgerson)
- Skill levels of workforce weighted by relative
wages - Data demanding
- assumption of perfect competition in relative
remunerations
32Labour Quality Measures Income and Education
33Labour Quality Growth Income and Education
Approaches()
34Sources of Labour Productivity Growth ()
35Sources of Labour Productivity Growth Variable
Factor Shares (Income)
36Sources of Labour Productivity Growth Variable
Factor Shares (Education)
37Italy Sources of Labour Productivity Growth ()
38The Sources of Labour Productivity Growth
- TFP accounts for half the labour productivity
increase 1850-2000 - Factor accumulation ruled prior to 1950 and since
1987 - TFP, hegemonic in the 1920s and 1953-1986
- Labour productivity and TFP growth, closely
associated1920s, 1951-74, labour productivity
acceleration mostly due to TFP -
- Broad capital accumulation and efficiency gains,
complementary for
labour productivity growth -
- TFP and capital main spurts coincide with
- the impact of the railways (1850s-80),
- the electrification (the 1920s and 1950s)
- adoption of new vintage technology in the Golden
Age
39Why the recent Labour Productivity Slowdown?
- Have Italy Spain exhausted their catching-up
potential? - TFP gains from structural change, exhausted
- Spain, industry, efficient and small (17.5 GDP
in 2007), tiny agriculture (2.9 GDP in 2007),
but large services - Challenges
- - low productivity in construction and
services (IT) - - more education does not imply more human
capital
40Income Distribution and Poverty
- How has per capita GDP been distributed over
time? - Did growth reach the bottom of the distribution?
-
- Was there a growth-inequality trade-off?
- Did growth and inequality changes have an impact
on absolute poverty?
41How to measure inequality?
- Gini ? Gi pi pi ? ((yp yl)/ yl) pl pp L
A B
L - ? Gi pi p i (Gini A), weighted sum of
within-group inequality - ? ((yp yl)/ yl) pl pp (Gini B),
between-group inequality - (L) is the overlapping component (residual)
42Gini and its Components, 1850-2000
43Inequality Trends
- Wide inverted W, peaks in 1918 and 1953
- Between-group inequality ruled the pre-1960 era
- Within-group inequality ruled the post-1960 era
- gt social concern for different kinds of
inequality before and after 1960 - When inequality plotted against real per capita
income, a single Kuznets curve
44The Kuznets Curve in Spain (Kernel Fit
Epanechnikov, h0.4042)
45Inequality before and after Franco
- Why Inequality fell in the globalization
backlash? - Forces pushing for re-distribution
- - unions increasing bargaining power -
labour unrest- menace to property rights - gt the drop in capital and land returns
relative to labour more than
offset the rise in wage dispersion - Interwar inequality decline, at odds with a war
of attrition on income (wealth) distribution - Early Francoism rising inequality
- inequality fell within labour and capital but
polarization increased - Late Francoism
- Redistribution gt inequality reduction
46Comparative Findings
- Political factors conditioned income inequality
trends - WWs increased inequality with no permanent
effects -
- No impact of progressive taxation until the 1980s
-
- The inequality rise in early Francoism, not
explained by property income concentration, but
by its share in GDP gt divisive effects of Civil
War - Spain converged to OECD, except for the Autarchy
- Spain and Latin America divergence since the
1950s
47Gini in Spain and OECD Countries, 1870-2000
48Italy Income Inequality, 1861-2011
49Gini in Spain and Latin America, 1870-2000
50Was There Economic Polarization?
- Polarization An increase in between-group
inequality (a growing gap between proprietors
and workers) parallels a decline in within-group
inequality -
- A measure of polarization Ratio of
between-group inequality to
within-group inequality (Zhang Kanbur 2001)
51Economic Polarization (Gini)
52Did growth and income distribution changes have
an impact on absolute poverty?
- Poverty reduction depends on the
- Growth of average incomes
- Changes in income distribution
- How sensitive poverty is to growth and inequality
- But also on the initial
- inequality level
- level of development
- poverty line
53Poverty Headcount ()(Poverty Line 1985
Geary-Khamis 2 a day per person)
54Poverty Trends
- A long run decline in absolute poverty, with
reversals in the early 20th Century and during
Autarchy - Poverty reduction at a different speed
- - slower before World War I gt the impact
of growth on poverty weakened with rising
inequality low initial development - - faster, and accelerating, in the 20th
Century once the initial income
constraint was releasedgt by the end of
Francoism, absolute poverty lt 2 - Growth plus inequality fall (Interwar since
1950s) gt reduction in absolute poverty