Demand multipliers and technical performance of a Southern Eurozone economy in hard times: Kalman–Leontief–Sraffa evidence from the Greek economy, 2010–2014

This paper forges a Kalman–Leontief–Sraffa single production framework and, thus, provides estimations and spectral analysis of changes in employment requirements, demand multipliers and technical performance of the Greek economy for the fiscal adjustment–wage devaluation period 2010–2014. It is detected that (i) there were no considerable shifts in industry rankings according to the employment requirements and multipliers; (ii) there were increasing trends in the employment leakages and multipliers and, with the exception of the primary sector, also in the employment requirements; (iii) the economy experienced a “labour-using, domestic capital-saving and imported capital-using” pattern of technical change, whereas its primary sector experienced a “labour-saving and capital-using” pattern of technical change; and (iv) the economy’s overall technical performance decreased and the percentage effect of imported inputs on this performance increased. These findings rather indicate that the implemented “horizontal” economic policy did not address the structural problems of the Greek economy and, therefore, raise doubts about its long-term growth prospects.