Spain | Productivity and reallocation of resources: A structural challenge

Summary

The Spanish economy is growing more through employment than productivity. The efficient allocation of resources (capital and labor) to more productive sectors is one of the structural challenges. There's an urgent need to boost investment, human capital, and AI, and remove barriers for the most productive companies to grow.

Key points

• Key points:
• Since the post-pandemic recovery began, employment has grown, hours have decreased, and production has increased. However, the value added per hour and per employed person has barely improved.
• Productivity increases through two channels: either because it improves generally across all companies or, as is more common, because the most productive companies attract more resources, generating a composition effect that raises the efficiency with which employment and capital are allocated.
• The sectoral evolution of the contribution to the growth of employment or hours worked versus the behavior of productivity between 2019 and 2025 offers a signal about allocative efficiency.
• As BBVA Research previously analyzed, the virtually non-existent correlation between the two variables during this period (whether measured in terms of employed persons or hours worked) reveals a worrying pattern.
• In the current expansion, sectors that experience significant productivity increases tend to create few jobs, while sectors with substantial employment growth often fail to improve productivity, or even reduce it.

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