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Instituto Valenciano de Investigaciones Económicas

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Miguel Artola: "During the last 40 years, the growth of wealth in Spain has been based on the increase in real estate prices"

According to Clara Martinez-Toledado, Spain’s richest 10% hold 40% of Spain’s real estate assets

IvieLAB (Laboratory for the analysis and evaluation of public policy) organized the seminar The pillars of wellbeing in the 21st century: Lessons from the 20th century, held in Valencia at the University–Business Foundation of the University of Valencia (Adeit), bringing together experts who analyzed the drivers of Spain’s economic growth in the past to help face future challenges.

Miguel Artola, Professor at the University Carlos III of Madrid, highlighted the price of real estate assets and land as determinants of Spain’s wealth increase since the 1980s. He also emphasized that, while investment in financial assets has remained constant in Spain, investment in housing has increased rapidly. In this way, “half of the nation’s growth in wealth is not due to savings, but to the increase in real estate prices, including urban land value”. According to Artola, this pattern of wealth accumulation is specific to Spain and does not occur in other developed economies. In his view, it is due to the monetary policy of low-interest rates along with easy access to credit loans, and a demographic increase, resulting in higher housing prices.

In addition, Clara Martinez-Toledado, PhD student at the Paris School of Economics, focused her presentation on the composition and distribution of wealth in Spanish households. She points out that the real estate boom has not changed the distribution of wealth since people with greater resources have more investment options and can better assess the risks of investing in the real estate sector. During the boom, the richest invested in housing, while disinvesting in this sector and focusing more on financial asset investments during the crisis. According to the economist, Spain’s wealthiest population owns more properties than in other countries. In particular, the top 10% of the richest in Spain hold 40% of the country’s real estate assets, compared to other countries, such as France whose richest population owns 25%. Other experts participating in the seminar focused their presentations on the problems of productivity in Spain since the past century.

One of the experts, Leandro Prados de la Escosura, Professor at the University Carlos III of Madrid, considers that labor productivity improved during the crisis, but at the cost of jobs. He argues that GDP levels have improved with the economic recovery, but not as a result of an increase in efficiency. “It is a problem that future generations are going to inherit, because employment is not being created in sectors that are productive and make the economy grow.”

Ivie’s Director of International Projects and Professor at the University of Valencia, Matilde Mas, also took part in the seminar. Coinciding with Prados’ analysis, she insists that the problem in Spain is that although it accumulates capital, it is not used in an efficient way, resulting in negative productivity growth rates. She concludes that “it is very important to invest in R&D, to improve firms’ organizational structure, to train workers and to give more emphasis to design and brand image, that is, to further invest in intangibles to achieve its full potential”.

The series of conferences and seminars on the sustainability of welfare in Spain during the 21st century, organized by IvieLAB, continues on July 12 with the seminar Welfare policies in the Spanish State of Autonomies, which will consider the welfare state across Spanish regions and the equal access to basic public services for all citizens.

25 June 2018