Spain | More employment and less convergence in productivity

The recent release of regional economic accounts by Spain’s National Statistics Institute (INE) offers some interesting insights into regional differences in employment, population, and GDP growth. One particularly illustrative example is the following. Between 2019 and 2025, real GDP in the Valencian Community and Galicia grew by around 10%. However, their GDP per capita followed very different paths: it increased by less than 1% in the former and by nearly 10% in the latter. The difference largely reflects population growth, which reached 9.2% in the Valencian Community but only 0.9% in Galicia. Looking at GDP growth alone, therefore, provides an incomplete picture of economic developments across Spain’s regions and the country as a whole.

Since the beginning of the century, productivity gaps between Spain’s autonomous communities, measured by GDP per employed person, have widened. The coefficient of variation—a measure of relative dispersion around the average for the 17 autonomous communities—rose from 7.9% in 2000 to 9.5% in 2025. By contrast, the coefficient of variation for real GDP per capita declined from 20.7% in 2000 to 19.2% in 2012, remaining at virtually the same level in 2025. For GDP per working-age person (ages 16–64), regional dispersion in 2025 was very similar to that recorded in 2000. Although convergence in GDP per capita stalled years ago, there has been no divergence comparable to that observed in productivity. How can these trends coexist?

A useful starting point is a simple accounting identity. GDP per capita is the product of three ratios: GDP per employed person, the employment rate among the population ages 16–64, and the share of this age group in the total population. The first component serves as a proxy for labor productivity, while the other two capture the relationship between employment, population, and demographic structure.

This breakdown helps explain how regional disparities have evolved. While dispersion in GDP per employed person increased, differences in employment rates narrowed, with their coefficient of variation falling from 13.1% to 10.4% between 2000 and 2025. This largely offset the widening productivity gap when calculating GDP per working-age person. In addition, demographic factors have tended to cushion some of the disparities in GDP per capita. This offsetting effect is an aggregate result across the autonomous communities: the underlying factors and their relative magnitudes vary from one region to another.

Faster population growth, slower GDP per capita growth

Recent data reveal another important pattern. Between 2019 and 2025, regions with faster population growth tended to experience stronger real GDP growth, but smaller gains in GDP per capita. A similar relationship emerges when comparing growth in the working-age population with growth in GDP per working-age person. Likewise, regions with stronger employment growth also recorded larger increases in aggregate GDP, although GDP per employed person tended to grow more slowly. All three comparisons point to the same distinction: expanding the size of an economy does not necessarily mean achieving equally strong growth in output per capita or per worker.

The comparison between the Valencian Community and Galicia illustrates this distinction. In 2025, both economies produced approximately 10% more than in 2019. In the Valencian Community, this increase was accompanied by almost equally strong population growth; in Galicia, the population barely changed. This does not mean that population growth necessarily prevents output from rising. In fact, during the period analyzed, regions with the largest population increases also tended to record stronger overall GDP growth. The key question is whether output grows fast enough to raise GDP per capita at the same time.

A similar pattern emerges for employment. To avoid distortions from the pandemic, it is also useful to examine the period between 2022, when Spain’s GDP had already recovered to its 2019 level, and 2025. The relationship between regional employment growth and growth in GDP per employed person remains negative. In the Balearic Islands, for example, employment increased by nearly 13% over those three years, while real GDP grew by around 10%. As a result, GDP per employed person declined by slightly more than 2%.

This evidence requires careful interpretation. Part of the negative relationship reflects a composition effect: employment grows faster in occupations and/or sectors with below-average productivity. Moreover, these figures provide no information about the characteristics of the jobs created or the investment available per worker. It is also possible that productive capital, infrastructure, and the skills needed to increase output take longer to adjust than population and employment, or that innovation responds to demographic changes with a time lag. Nevertheless, the observed relationship reveals a pattern in which output in the regions experiencing the strongest growth in population, immigration, and employment has not increased proportionately, at least so far.

It is also important to distinguish recent changes from current levels. In 2025, regions with higher GDP per employed person also tended to have higher employment-to-working-age-population ratios. The correlation between these two measures was close to 0.80. Thus, slower recent productivity growth in regions that have added more jobs does not mean that regions with higher relative employment levels are currently the least productive. Over time, economic activity and productivity may be concentrated in certain regions even as their growth rates differ.

The economic policy takeaway is not that population or employment growth necessarily undermines a region’s prosperity. Both can boost GDP and improve opportunities and well-being for residents. However, these benefits are not guaranteed, and unrealistic expectations should be avoided. The challenge is to ensure that employment growth is accompanied by the investment, training, and resource reallocation needed to foster activities capable of generating greater value per worker. Regional experience shows that aggregate growth, productivity, and income convergence are driven by related factors, but they do not always advance at the same pace. Improving employment opportunities is a necessary condition, but sustaining regional convergence in productivity and income per capita also requires increasing the productive capacity of those in work.

Press article. Published in Actualidad Económica (El Mundo) on October 18, 2026.