Determinants of the Growth Slowdown in Greece during the Previous Growth Cycle
The Greek economy was growing at high rates during the post-war period and up until the middle of the 1970s, while afterwards real GDP growth rates fell significantly and remained on average very low during the 1980s. Using a generalised production function approach, this paper aims at assessing the importance of various factors in explaining this slowdown, in an attempt to isolate factors that could still be at play during the current cycle. More specifically, emphasis is placed on the share of the public sector, capital accumulation, education, the impact of international developments in productivity growth, and the ability of the Greek economy to exploit technology transfer. Main findings include the negative relationship between the size of the public sector and growth and the fact that during that period Greece seemed unable to take advantage of accumulated knowledge and R&D capital in other parts of the world. Causality tests are performed in order to verify the robustness of these findings. Also, a potentially appropriate economic policy mix is evaluated accordingly.