Access to credit
Budgetary constraints determine firms' investment decisions in both capital formation and R&D. Current labour productivity and future labour productivity growth are tightly linked to this type of investment decision. Access to credit by firms plays a fundamental role in determining the capacity of firms to invest.
Capital investment strongly influences labour productivity. New machines can improve the efficiency of production processes and permanently increase productivity. As already mentioned, part of the recent improvement in Spanish labour productivity can be explained by the massive destruction of jobs. These productivity gains are likely to be transitory, though, since the actual unemployment rate is unusually high and likely to be reduced in the near future. However, part of the productivity increase could also come from an increase in the efficiency of production processes promoted by capital investments. We analyse this aspect in this section.
Figure 8.16 shows the evolution of the ratio of gross fixed capital formation over gross value added for non-financial corporations. We see that this ratio in Spain has been above the European average since the late 1990s. However, from 2007 to 2009, the relative importance of capital formation decreased by more than ten percentage points. This path is in sharp contrast with respect to France, the UK, or Germany, where the decrease in the share of gross fixed capital formation was much less. How can we explain these differences?
Figure 8.17 allows us to provide one possible answer to this question. This figure compares the success rate in obtaining loan finance by various sources between 2007 and 2010. While for the UK, Germany, and France, there is a slight decrease in the success rate
Figure 8.16. Gross fixed capital formation over gross value added of nonfinancial corporations
Figure 8.17. Success rate in obtaining loan finance by sources. Total business economy except financial and insurance activities. Percentage of requests accepted
for most of the considered sources, for Spain, we observe a very sharp reduction in the success rate for all sources. Access to credit became particularly complicated in Spain during the crisis period, which certainly contributed to the reduction in gross fixed capital formation.
-  The impact of budgetary constraints on employment is analysed in Bentolila, Izquierdo,andJimeno (2013) who, workingwith Spanish data, find that firms heavily indebted to weakbanks before the crisis suffered an additional employment drop during the crisis.