The café economy: Structural transformation in Greece in the wake of austerity and “reforms”

Michalis Nikiforos, Vlassis Missos, Christos Pierros and Nikolaos Rodousakis

GreeSE – Hellenic Observatory Papers on Greece and Southeast Europe from Hellenic Observatory, LSE

Abstract: This paper investigates the structural transformation of the Greek economy over the past fifteen years, focusing on the increasing dominance of the Accommodation and Food Service Activities (AFSA) sector in the aftermath of austerity and structural reforms. Despite promises of productivity gains through labor market and product market reforms, the Greek economy has experienced a sharp decline in labor productivity and a significant reallocation of employment towards low-productivity sectors, especially AFSA, reminiscent of a Lewis-type dual sector economy. Using a simple Panel-VAR model we find that declining aggregate demand and real wages were key drivers of this productivity collapse. Our findings support theories of technological change that emphasize output growth and the cost of labor as fundamental determinants of productivity growth.

Keywords: Greece; austerity, structural reforms, structural transformation, technical change (search for similar items in EconPapers)
JEL-codes: E6 H3 J38 J5 O1 O3 Z30 (search for similar items in EconPapers)
Date: 2025-10
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Persistent link: https://EconPapers.repec.org/RePEc:hel:greese:212

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