Is export-led growth feasible?

Transcription

1 Is export-led growth feasible? Aristos Doxiadis 1

2 0.00% GREECE: current account, % GDP Current account -2.00% -4.00% -6.00% -8.00% % % % % Current account 2

3 10.00 Current account, % of GDP (OECD) France Germany Greece Ireland Italy Portugal Spain Turkey

4 10.00% GREECE: current account components, % GDP 5.00% 0.00% -5.00% % % % % Current account Current account, Goods Current account, Services Current account, Income Current account, Current transfers 4

5 GREECE: current account goods and services, % GDP 10.00% 5.00% 0.00% -5.00% % % % % Current account, Goods Current account, Services Current account, Goods and Services 5

6 Daniel Gros CEPS Commentary 8 May

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8 Explaining rigidities Crisis-specific factors: Credit crunch Shipping and tourism issues Long-term characteristics: Small size of firms Political economy: tradables vs non-tradables 8

9 Greece, Gross Value Added, Selected Sectors (euro million) 25,000.0 C - Manufacture 20,000.0 D - Electricity, gas, steam and air conditioning supply 15,000.0 G47 - Retail trade, except of motor vehicles and motorcycles H50 - Water transport 10, ,000.0 I - Accommodation and food service activities Q86 - Human health activities

10 Labor cost index, hourly basis (2008=100) (Eurostat) Euro area (17 countries) EU (27 countries) Estonia Greece Spain France Italy Latvia Lithuania Portugal Q2 2010Q3 2010Q4 2011Q1 2011Q2 2011Q3 2011Q4 2012Q1 2012Q2 2012Q3 Puzzle: ULC decreased much less 10

11 Exports of goods and Imports of goods GEO/INDIC_NA services and services Trade G&S Belgium Ireland Netherlands Bulgaria Czech Republic Austria Denmark Sweden Finland Poland Portugal Romania Greece Spain Italy France Percent of GDP, 2008 (Eurostat) 11

12 GEO/INDIC_NA Exports of goods Imports of goods Trade goods Belgium Netherlands Bulgaria Czech Republic Austria Ireland Sweden Poland Finland Denmark Romania Portugal Italy France Spain Greece Percent of GDP, 2008 (Eurostat) 12

13 70.00% Greece: Trade/GDP 60.00% 50.00% 40.00% Trade/GDP 30.00% 20.00% 10.00% 0.00%

14 Why is Greek trade low? Possible explanations Barriers to imports (support local production) Consumption patterns/lifestyle (tilted to nontradables) Non-tradable rents 14

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16 Size of firms Greece as outlier Compared to EU27: Largest % of self-employed in total labor force Largest % of employees in micro-business in the NFBE Smallest farms Smallest % of Labor Force and Value Added in business of over 250 employees 16 16

17 Self-employment * as % of civilian employment, 2007 Top five OECD countries Bottom five OECD countries Turkey 39.0 GREECE 35.1 Mexico 33.9 Korea 31.3 Italy 25.7 OECD - Total 15.8 France 9.0 Denmark 8.8 Norway 7.8 United States 7.0 Luxembourg 5.9 *Including employers and unpaid family members 17 17

18 Year 2007 Self- Employed Employees Other* European Union (27 countries) 15.1% 83.1% 1.8% Germany 10.9% 88.1% 1.0% Greece 29.3% 64.3% 6.4% Spain 16.5% 82.3% 1.1% Italy 24.3% 73.9% 1.8% Portugal 23.5% 75.5% 1.1% Bulgaria 11.2% 87.6% 1.2% Romania 21.2% 66.3% 12.6% Turkey 26.9% 60.5% 12.7% *Other: mostly unpaid family members 18 18

19 Self-employment distorts macro figures Share of wages in GDP (2007) Compensation of Employees Gr. Operating Surplus & Mixed Income Taxes on production & imports Germany Greece 48.5% 35.2% 40.0% 53.3% 11.5% 11.5% 19 19

20 Greece had the highest % of employed in units of under 10 people among the 27 EU countries Source: Eurostat, Statistics in Focus, 31/

21 Size of firms: why it matters (hypotheses) Static effect: Smaller firms have lower productivity, so less able to compete internationally (data to be added) Dynamic effects: Sizeable firms have more flexibility to add labor to existing plants (fixed vs variable inputs) Bigger management structures can multiply plants and markets faster (lower discovery costs, leveraging in-house knowhow) 21 21

22 Size of firms: why does small persist? History: ottoman empire, not feudalism No class of dispossessed peasants Fragmented land ownership, protected by democracy Small holders resist wage-labour Polyergic family strategies Regulation: erratic, obstructs growth Tax and labor law evasion Foreign direct investment discouraged Protected business models 22 22

23 Distribution of employment: NT vs T, Large vs SME Share in total employment, 2007 ** employment in firms >20 employees 23 23

24 BIG >250 SME <25O NON-TRADABLE Government Utilities Banks 22.5% Telecoms Media Retail Media Retail Shops Lawyers Hairdressers 52.2% TRADABLE Tourism Manufacturing 2.6% Airlines Shipping (6.5%) Tourism Small manufacture Agriculture 22.7% Workshops Digital Applications Share in total employment,

25 Notes to Table 4: Numbers in italics are from the LFS. Numbers in shaded cells are my own guesstimates. They are mostly about the split between large and small employers in LFS data. For industry 55.3 (restaurants, etc) I have assumed that 30% worked in tradable (i.e. tourism-related) establishments. All other numbers are from SBS. (Shifting to Tradables, A. Doxiadis, 2011) 25 25

26 Greece: Ratio of tradables to total 35.00% 33.00% 31.00% 29.00% 27.00% 25.00% Gross Value Added Employment (1000 persons) 23.00% 21.00% 19.00% 17.00% 15.00%

27 Political economy: Types of political rent Direct from public purse - legal Pensions (special categories of) Public sector salaries and supplements (clientele appointments) Public procurement Privatization hostages Farmer s subsidies * Indirect Protected professions Administered prices, etc Illegal Corruption Comparative noncompliance* Cartel behavior * * : Applies also to tradables 27 27

28 Political economy: Tradables vs Non-Tradables Stylized facts (hypotheses, to be verified): Greater political representation of NT Higher factor prices/ rents in NT (beyond Balassa- Samuelson) Salaries and benefits for comparable skills Mark-ups (data??) Comparatively high ratio of NT/T in GDP (and faster shift to NT) Excess of middle-class jobs in NT 28 28

29 Physicians per 1000 population 29 29

30 Spending on pharma 30 30

31 Nurses per 1000 population 31 31

32 Annual compensation per full time equivalent employee Total - All NACE activities Agriculture, forestry and fishing Mining and quarrying Manufacturing Electricity, gas, steam and air conditioning supply Water supply; sewerage, waste management and remediation activities Construction Wholesale and retail trade; repair of motor vehicles and motorcycles Transportation and storage Accommodation and food service activities Information and communication Financial and insurance activities Real estate activities Professional, scientific and technical activities 20.0 Administrative and support service activities Public administration and defence; compulsory social security 10.0 Education Human health and social work activities Arts, entertainment and recreation Other service activities Activities of households as employers; undifferentiated goodsand services-producing activities of households for own use 32

33 Political economy: Effects on tradable productivity (hypotheses) Rents in NT => high input costs in T Rents in NT => wages rise faster than productivity in T Tax burden Regulatory spill-over: Work-time regulation Entrepreneurship as scarce factor (Baumol) 33 33

34 Tradable vs Non-tradable: technical issues Identification of Tradability of sectors: Ad hoc % of international trade/local output Classification in literature Variability over time 34 34

35 Typology of investment and growth paths Each path faces different challenges

36 What constrains growth? Intersectoral Incentives Institutional barriers Discovery costs Factor costs and taxes New business Step growth Yes No No Smooth growth Yes Yes Not much Yes Yes No n.a. Yes Yes 36

37 What constrains growth? Intersectoral Incentives Institutional barriers Discovery costs Factor costs and taxes New business Step growth Yes No No Smooth growth Yes Yes Not much Yes Yes No n.a. Yes Yes 37

38 What constrains FDI? FDI Intersectoral Incentives Institutional barriers Discovery costs Factor costs and taxes No Yes Some Yes 38