Nikolaos Leounakis and Ploutarchos Sakellaris
We decompose Greek economic performance over the last sixty years into the contributions of productivity, capital accumulation, and labor growth. Recent Greek economic history is a succession of long periods of boom with long periods of stagnation or depression.
The decisive factor in either booms or slumps has been total factor productivity (TFP) growth. In particular, bad performance of TFP is the main culprit for the fourteen-year recession from 1980 to 1993 as well as for the current depression. This suggests that action on reversing the shortfall in productivity should be the most important focus for policy makers now.
We argue that the crisis has led to permanent loss of output. In projections, we show that the economy needs to grow at average rates of about 3.5% over the next five years to be able to recover in 2026 the standard of living enjoyed in 2007, its peak historical level.
This paper was presented to the Tufts/LSE Conference on Greece and the Euro: From Crisis to Recovery on April 12, 2019.