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GROWING LIKE SPAIN: 1995–2007
Author(s) -
GarcíaSantana Manuel,
MoralBenito Enrique,
PijoanMas Josep,
Ramos Roberto
Publication year - 2020
Publication title -
international economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.658
H-Index - 86
eISSN - 1468-2354
pISSN - 0020-6598
DOI - 10.1111/iere.12427
Subject(s) - total factor productivity , boom , fell , productivity , politics , cronyism , economics , business , demographic economics , economic growth , political science , geography , cartography , environmental engineering , law , engineering
Measured total factor productivity (TFP) fell in Spain during the boom years of 1995–2007. Using administrative data from the quasi‐universe of firms, we show that there was an increase in misallocation, which was more severe in sectors where connections with public officials are more important for business success. We write and estimate a simple model of cronyism in which heterogeneous firms invest in political connections. Our quantitative exercise concludes that the institutional decline over this period costed 1.9% growth in TFP per year and a 0.8% annual increase in the resources spent by firms in establishing political connections.