Growth and Productivity in Spain. From Autarky to Internationalisation

Spain’s economic growth from 1960 to 2024 has increased its real GDP tenfold, driven mostly by the use of labour and various forms of capital rather than by gains in total factor productivity (TFP). Labour productivity trends reveal an unusually large trade-off between employment and productivity growth, a pattern that differs from other countries and is primarily explained by the volatility of both employment and investment rates. Capital productivity has experienced a continuous decline, while TFP has remained weak and has continued to fluctuate. These trends suggest overcapitalisation, excess capacity and inefficient resource allocation across assets and sectors. The good news is that productive efficiency has improved since the pandemic. Applying the analytical framework proposed by Van Ark, de Vries, and Pilat (2024) leads to the following conclusions:

• Intensifying investment in intangible assets is essential;
• Strengthening human capital requires aligning the education system with labour market demands;
• Business dynamics must promote a more efficient allocation of productive factors and enhance the potential for innovation and transformation; and
• Public sector reforms should focus on improving education and R&D outcomes, removing barriers to business creation and growth, and managing public investment through rigorous cost-benefit analyses.

Authors Matilde Mas, Francisco Pérez, Ernest Reig, Juan Fernández de Guevara, Lorenzo Serrano and Juan Carlos Robledo

This paper is part of our Pro-Productivity Policies: Country Experiences series. Read more in this series here.