1. INTRODUCTION
: key and brilliant period, convergence with Europe
Scheme:
General characteristics of the long-term economic growth
Causes of this growth
Structural changes
Macroeconomic problems

2. Average annual growth rate of per capita income (%)
SPAIN
EUROPE
3.1
2.5
6.1
3.5
0.5
2.1
1986-today
2.8
1.9
1.4
1.2
2.4

3. Same stages as in Europe, but more intense
Growth → open trade
1960 (P. de E.) and 1986 (EU)
Crisis → institutional changes
1975 (transition) and 1992 (Maastricht)
New tendency since 1996: Spain grows with Europe in crisis

4. (NO natural resources or institutions) Y = L(1-α) * K(α) * et
Y = f ( L , K , TP )
(NO natural resources or institutions)
Y = L(1-α) * K(α) * et
Why income grows?
1. Growth of production factors (L and K)
2. Improvement of its productivity (TP)

5. Labor (L)
Y / Pop. = Y / L * L / Pop. (∆ Y / Pop. = ∆ Y / L + ∆ L / Pop.)
Europe and Spain: only productivity
USA: productivity + employment
Why?
USA has had greater productivity
International competition (is not easy to choose)
Markets less flexible (in Europe and Spain)

6. Real per capita income and labor productivity of labor force in Spain, (annual variation rates)

7. Capital (K) Y = L(1-α) * K(α) * et Y / L = [L(1-α) * K(α) * et] / L
Y / L = (K / L)α + et
∆ (Y / L) = α ∆ (K / L) + ∆ TP

8. Capitalization of the economy ∆ (K / L)
The most important variable of economic growth in poor countries
Spain in the 1960´s:
Foreign capital
Labor force was relatively expensive
Industrial sector was more important in GDP
Infrastructures (EU)
Changes since 1980:
Less foreign capital
Capital becomes more relatively expensive
Service sector becomes more important: hard to capitalize

9. Contribution of physical capital to the increase of labor productivity in Spain, (annual variation rates)

10. Technological progress (∆ TP)
Overcome diminishing returns of capital
Increased in Spain during last years because:
Increase in capital, makes labor force more skilled and qualified
Increase in human capital
Increase in technology (but still insufficient in Spain)
Others: trade openness, change in productive structure, law and institutions, control of inflation

11. Structural changes Changes in productive structure Trade openness
Changes in Public Administrations
Best income distribution