Productivity Growth and Business Cycles: Case Study of the Spanish Construction Industry

Abstract

The purpose of this paper is to examine the degree of productivity change in the construction industry and relate these changes to variations in the business cycle. The activity of Spanish firms engaged in the construction of buildings, civil engineering, and specialized activities during the 2000s is used as a case study. Productivity change is estimated by creating a bilateral index using data envelopment analysis, complemented with bootstrapping. The results showed that Spanish firms in building construction experienced a fall in productivity because of a decline in technical and scale efficiencies, despite improvements in technology. The productivity change in civil engineering and specialized construction also was negative; however, the source of this decline was technical regress and negative scale efficiency change, although efficiency change and technology scale change contributed positively. The results further revealed that the firms reacted to the financial crisis of the late 2000s by introducing technological change, although the productive, technical, and scale efficiency changes all were negatively impacted during the economic downturn, suggesting an underuse of resources. This research contributes to the body of knowledge by being the first to analyze the impact of fluctuations in business cycles caused by the 2008 economic crisis on the productivity growth of construction firms representing three construction sectors, and by measuring productivity growth from a multidimensional perspective.