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The "New Growth Model". How and with Whom?

Florentino Felgueroso () and Sergi Jimenez-Martin ()

No 2009-39, Working Papers from FEDEA

Abstract: After the early 90s crisis, Spain had a long period of prosperity that ended abruptly with the recent global crisis. What many did not realized is that Spain, by following a different growth trajectory than a majority of the EU15 countries, was choosing a wrong detour. In this paper, we argue that the growth path chosen in early 90s lead to a wrong accumulation of human capital and technological skills in order to adopt ICT technologies. The adverse demographic structure (the significant decrease in the size of the young cohorts), the dual composition of the population by educational levels (high share of people with low and high educational attainment, and a very low share of medium attainment) and the huge and rapid increase of female participation rates have been key factors in this process. In particular, and in contrast with a majority of the EU15 countries, dropout rates and computer illiteracy have remain high, favoring growth in low skills low productivity sectors and hurting employment opportunities in knowledge intensive sectors. Moreover, the lack of people with medium educational attainment has also been responsible for a growing mismatch of the high-educated population. The recent crisis has to be viewed as an opportunity to get back to the correct growth track, by reducing incentives to dropout and by favoring skill adjustment. Targeted schooling (to reduce dropout) and training (to increase ICT literacy of medium age and older cohorts) should be priority policies aimed at increasing productivity in the old sectors, creating employment in intensive ICT services sectors and covering the huge gap in professional and technicians in comparison to other EU15 countries. However, some factors that have slowed the adoption of new technologies in the recent past will persist in the coming decade. In particular, the significant decrease of the cohorts of young entrants and the educational path dependencies should continue to act as resilience factors to implement the reforms required to stimulate the change in the growth model. Furthermore, the permanent mismatch of the most abundant university cohorts (those who graduated around the mid-90s), also constitutes a brake on change, given the drastic decline in new graduates in the near future. Thus, policies focused on young second-generation of immigrants and incentives to the entry of skilled immigrants should also be considered.

Date: 2009-12
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