Trends in total factor productivity in Greece and its determinants during the period 2005-2019

We examine the growth rate of Total Factor Productivity (TFP) for fifteen 2-digit sectors of the Greek economy during the period 2005-2019. This measure is the sum of the rate of technical change, the rate of change in technical efficiency and the rate of change in returns to scale, that is, we have not adopted a full efficiency assumption in production. The estimations show that the vast majority of the sectors suffered negative TFP growth, primarily during the period of the economic crisis and in the first 3-4 years of implementation of the economic adjustment programmes, whereas in the subsequent years this negative rate of change slowed down. Exporting firms exhibit less negative TFP growth, likely because the production of these firms was more resistant to the pressures exerted by the crisis and, as a result, the components of TFP were less affected. Medium-sized and large firms have also recorded less negative TFP growth, which probably reflects the fact that they were better placed to respond to the fluctuations of the Greek economy, for example through higher profitability or export activity. ICT-intensive firms had a negative TFP growth rate, which was increasing in the 2006-2010 period, probably due to the unfavourable macroeconomic conditions that hampered their production. The firms that have not survived the entire 2006-2019 period had a strongly negative rate of TFP change and this most likely explains their failure to survive. In contrast, firms that have survived had, on average, a negative TFP growth rate, which was 11.1 percentage points lower than that of non-surviving firms. Finally, the results reflect a decline or small fluctuations in productivity indicators for most 1-digit sectors, since 2011 or 2012, in relation to their levels before the economic crisis.