The contribution of industry to the Greek economy: facts and prospects

Abstract

The scope of the study is to examine the impact of various factors on the growth of Greek industrial firms, in order to identify those that can contribute to a gradual recovery of Industry in the coming years. In this context, we estimate a firm growth model with the Quantile Regression econometric method, using an unbalanced panel dataset of 18,143 companies that were active in Greek Industry over the period 2005-2018. The explanatory variables used are firm-, sectorand macroeconomic environment-specific. Further, we estimate the effects on firm growth from the structural reforms related to business environment and from the sector’s participation in global value chains within or beyond the EU. The estimations highlight the positive effect on firm growth from exports and the reduction in the time and cost required to export, the availability of funding from the banking sector and the stock market, as well as from the reduction in the cost and procedures to start a business. Positive effects also stem from the participation of the faster-growing Greek industrial companies in value chains mainly outside the EU. By contrast, high corporate debt to banks, adverse macroeconomic conditions, energy costs and the participation of businesses other than the faster-growing ones in value chains in EU countries have a negative impact on firm growth. The latter effect is possibly due to the strong competition that these businesses face in the European markets. Some differences appear when estimates are made for the subsamples of high and low performance industrial sectors in terms of economic activity, financial efficiency, innovativeness and extroversion. The study includes policy recommendations based on the results of the estimations, to support growth in Industry. These concern the reduction of energy costs, the change in the depreciation method for investments in machinery and equipment, as well as the financing of the sector.