Facts on nontradables in the Portuguese economy

The rise of nontradable sectors has been mentioned as one of the causes of low economic growth and external imbalances at the root of Portugal’s current predicament – João Ferreira do Amaral and Vítor Bento were among the first to ring that alarm bell. The ECB, the EU and the IMF (troika) seem to share the same view. The 2012 OECD Economic Survey of Portugal has also stressed the need for eliminating the distortions that tilted the Portuguese economy towards low-productivity domestically-oriented sectors. Recently, the President, Aníbal Cavaco Silva, and the Minister of the Economy, Álvaro Santos Pereira, have also been calling for the re-industrialization of the Portuguese economy.    

In a joint paper with Pedro Bação, we describe the main trends and jumps in the evolution of nontradable sectors, since the mid-1950s, using four different databases to shed light on different dimensions of this issue. From our analysis we stress the following points:

1. Despite the pattern of the growth of the share of services being similar to that observed in other developed countries, since the early 1990s it has been significantly larger than in most countries.

2. The shift to nontradables in Portugal has been fast and it occurred essentially at the expense of agriculture in the period 1953-95, and essentially at the expense of industry in the period 1995-2009.

3. In 2009, the share of nontradables (defined as the sum of services plus construction) in total GVA reached 68%, if we exclude open service sectors, and 81.1%, if we treat all service sectors as nontradable.

4. More than half of the change towards nontradables since joining the European Union took place in the period 1988-1993.

5. Finally, we show that construction and services facing a strong Government demand were the main drivers of the increasing weight of nontradables in the Portuguese economy since 1986.

Source | The Portuguese Economy | http://theportugueseeconomy.blogspot.com/2012/12/facts-on-nontradables-in-portuguese.html

The poll tax moment of the Portuguese government

As I wrote in my last weekly column in Dinheiro Vivo, the government of Mr. Passos Coelho just went through its "poll tax" moment. As Mrs. Thatcher, more than twenty years ago, the government tried to implement an economic policy that (i) makes sense in some simple models of the economy, (ii) but has ambiguous effects once you change a few assumptions, (iii) was not progressive and because of that was politically toxic, (iv) led to widespread social protest, (v) and turned part of his own party and coalition against him.

Unlike Mrs. T, Mr. Passos Coelho seems to have been wise enough to move back before it was too late. Whether one agrees with the economic merits of the measure or not, kudos to him for stepping back from the trap that the great Mrs. Thatcher fell right into. Only time will show what the long-run consequences of this mis-step will be.

Source | The Portuguese Economy | http://theportugueseeconomy.blogspot.com/2012/09/the-poll-tax-moment-of-portuguese.html

Advertisement: a site for "probing into the Portuguese Economy"

I just browsed it, but so far it looks incredibly useful: http://www.peprobe.com.

Source | The Portuguese Economy | http://theportugueseeconomy.blogspot.com/2012/11/advertisement-site-for-probing-into.html