Improve Resource Allocation to Boost Growth in Greece

Selected Issues Papers, May 9, 2025

Source details

The productivity growth of the Greek economy has stagnated since the 2010 European Debt Crisis.
Reforms in product market regulations have been implemented; their impact on productivity has been mixed.
Firm-level data shows that resource misallocation worsened from 2009 to 2020; especially in non-tradable services and smaller firms.
Many firms have become more productive and new high-potential firms have emerged; their growth has not been sufficient to boost overall productivity.
Accelerating regulatory reforms could enhance competition and improve business dynamism.

Productivity growth: stagnation since the 2010 European Debt Crisis.
Resource allocation:
- Resource misallocation worsened from 2009 to 2020.
- Worsening was especially pronounced in non-tradable services and among smaller firms.
Firm dynamics:
- Many incumbent firms have become more productive.
- New high-potential firms have emerged but their expansion has not offset aggregate productivity weakness.
Policy reform effects:
- Reforms in product market regulations have had mixed effects on productivity to date.

Accelerate regulatory reforms to:
- Enhance competition across sectors.
- Improve business dynamism, particularly for smaller firms and service sectors.
Target reforms that improve:
- Entry and expansion of high-potential firms.
- Resource reallocation away from less productive firms toward more productive firms.
Consider complementary measures to ensure reforms translate into aggregate productivity gains (implied by findings on insufficient growth of high-potential firms).

Subject: Commodity markets, Corporate insolvency, Distressed assets, Economic sectors, Financial crises, Financial markets, Financial sector policy and analysis, Production, Productivity, Services sector, Solvency, Total factor productivity
Keywords: business dynamism, Commodity markets, Corporate insolvency, Distressed assets, efficiency in Greece, firm entry rate, firm size, Global, Greece's judicial system efficiency, judicial system reform, judiciary services, Policy simulation, Productivity, productivity dispersion, reforms in product market regulation, regulatory reform, resource allocation, Services sector, Solvency, Total factor productivity