the productivity slowdown in postwar greece

The Productivity Slowdown in Postwar Greece

. Dimitrios Mihail

Abstract. This article examines the two contrasting phases of labour productivity in postwar Greece. We present a model of trended labour productivity that synthesises mainstream technical factors, institutional arguments based on the social structure of accumulation framework, and Abramovitz’s catch-up hypothesis. The model is empirically estimated and the labour productivity growth is found to be sensitive to changes in capital intensity, proxies of power relations in the labour market, and a productivity convergence indicator.

1. Introduction

The reconstruction effort of the 1950s which followed the Civil War led to an impressive consolidation of the Greek economy. Economic expansion and rapid productivity growth was maintained up to 1973. Since then, all major macroeconomic indicators have deteriorated, underlining a course of deepening economic decline.

The aim of this paper is to formulate and estimate a data-coherent empirical model of secular labour productivity growth in postwar Greece. It should be noted that, despite the pivotal role of productivity slowdown in the stagflation of the last two decades, there is a lacuna in the relevant literature. This study tries to address this issue by seeking to explain the distinct phases of postwar labour productivity. We focus on determining the factors that contributed to rapid productivity growth, and explore why these changed and led to a secular productivity slowdown, reaching crisis levels in the 1980s.

Dimitrios M. Mihail, Department of Business Administration, University of

Received on May 31, 1994 and approved by the Editorial Board on February 21,

JEL 524

Macedonia, 156 Egnatia Street, GR-540 06 Thessaloniki, Greece.

1995.

LABOUR 9 (2) 189-205 (1995) 0 Fondazione Giacomo Brodolini 1995. Published by Blackwell Publishers, 108 Cowley Road, Oxford OX4 I F , UK and 238 Main Street, Cambridge, MA 02142. USA.

190 Dimitrios Mihail

Section 2 documents the presence of the two contrasting trends of productivity growth. Section 3 presents the theoretical framework of our analysis and lays out testable hypotheses. Section 4 tests the hypotheses econometrically and discusses the empirical findings. Section 5 draws the main conclusions.

2. The extent of the productivity slowdown

By using American aid and implementing bold economic measures, the Greek policy-makers succeeded in laying the foundations for an economic take-off by the late 1950s (Mihail, 1989: 17-29). In terms of output and productivity growth, the Greek economy outperformed most of the OECD countries in the 1960s and early 1970s. Table 1 reports growth rates of real GDP and real output per worker employed in the private business sector in most of the postwar period.' Both indicators provide evidence of an outstanding economic performace by Greece vis-u-vis the OECD countries prior to 1973. During the rest of the 1970s, the Greek growth rates slowed down, and in the 1980s they indicated an acceleration in economic decline.

Figure 1 traces the time-path of the labour productivity growth rate and the ratio of fixed investment to GDP.2 The latter is one of the most reliable indicators of the depth of economic crisis since it represents the proportion of social resources devoted to the expansion of the productionbase of an economy each year.

The time patterns of both the variables are indicative of relatively high levels of investment rate and productivity growth up to the early 1970s. After this period, they illustrate a depressed state both for capital accumulation and labour productivity in the postwar Greek e~onorny.~ I

Table 1. Growth of real GDP and labour productivity

Growth rates of labour Growth rates of GDP productivity.

1960-73 1973-79 1979-90 1960-73 1973-79 1979-90

Greece 7.4 4.3 1.7 8.8 3.3 0.7

OECD 4.8 3.2 2.8 4.1 1.4 1.4 OECD Europe 4.9 2.9 2.4 5.0 2.7 2.0

*Output per employed person in the business sector. Sources: Economic Outlook, vol. 22,1977: 140; vol. 52, 1992 151,201 (OECD).

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Productivity Slowdown in Postwar Greece 191

Figure 1. The productivity growth long-swings

0.225 r0.150

0, c 2

. -0.025 0.100 , , , , , I , , , , I , , , , , , , , , , , , , , , 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90

- Investment rate - - - - Productivity growth

3. Modelling labour productivity growth A synthesis

3.1. The theoretical framework

Our empirical model of productivity growth examines technical as well as social factors. In addition, it accounts for the fact that Greece is a less developed country which has the potential to increase productivity through a process of international convergence of labour productivity levels. Specifically, we propose a synthesis of factors widely used in mainstream analyses, the convergence hypothesis, and the social structure of accumulation approach.

Conventional analyses of productivity growth focus on technical determinants such as capital accumulation, resource utilisation, relative prices of external inputs, and R&D investment. What should be stressed, however, besides investment in plant, labour inputs and research and development, is the evolution of political and institutional arrangements which relate to the efficient use of existing factors of production.

It is worth mentioning that emphasis on institutional factors in economic analysis has recently been made by leading economists. Coase (1992: 718) argues that “it makes little sense for economists to discuss the process of exchange without specifymg the institutional

Q Fondmione Giacomo Brodolini 1995.


setting within which trading takes place”. Along this line of reasoning, Freeman (1993: 407), focusing on labour market institutions, concludes: ‘‘Conventional wisdom holds that developing countries should aspire to an essentially institutionless competitive ideal world. It views most labour institutions and interventions as impediments to the ideal, leaving little scope for analyses that illuminate how these institutions actually function and much room for “surprises” when they do more or less than act as flies in the pure-competitive ointment”.

In the light of these arguments, we try to enrich the mainstream analysis of productivity by introducing the dimension of conflict-ridden production relations embodied in certain institutionalised industrial relations. Non-conventional economists argue that modern economies have the tendency to provide a mode of moderating conflicting interest among social classes and groups. A set of core institutions, called social structure of accumulation (SSA), provides the mechanism for arranging power relations and hence accommodates trended productivity, profitability, and capital accumulation (Weisskopf et al., 1983; Bowles et al., 1989; Rebitzer, 1993: 1422-1429). This study maintains that the component of the postwar Greek SSA that comprised the postwar industrial relations system directly affected labour productivity.

A third perspective which contributes to the model is that related to the convergence hypothesis (Abramovitz, 1986). It stresses a tendency towards the ultimate convergence of productivity levels among OECD countries, and maintains that growth will be a positive function of the size of the productivity gap between a less advanced country and the leading country of the time. In examining the productivity phases of the Greek case, a catch up process can be easily related to the postwar reconstruction and consolidation of the country’s economy. On the other hand, as one would expect, the progressive convergence of the labour productivity levels between Greece and the advanced countries contributed to a slowdown in productivity growth.

3.2. Hypotheses

3.2.1. Conventional factors

It is widely held that fixed investment is a primary source of productivity increases, since most innovations become embodied in new plant and machinery. The more capital goods available to a given work force, the greater will be production. Hence, it is postulated that increases in the quantity of productive capital goods per unit of labour input can be expected to increase the amount of output per hour of 0 Fondazionc Giacomo Brodolini 1995

Productiviv Slowdown in Postwar Greece 193

labour employed. Empirical evidence tends to support such a hypothesis (McCarthy, 1978; Clark, 1978; Norsworthy et al., 1979; Nadiri, 1980).

The time series data indicate that the time pattern of capital-labour ratio is similar to that of the productivity growth series for the Greek economy. The capital intensity indicator, K,4 grew at a rate of 7.4% throughout the 1960s and up to 1973. Its growth rate considerably fell in the rest of the 1970s. It declined sharply during the 1980s, contributing to the productivity slowdown. Indeed, the average growth of the capital intensity variable is much lower in the 1974-1990 period, registering only 4.3%.

Another important determinant is capacity utilisation (Nadiri, 1980; Denison, 1983). Fluctuations in the intensity of use of factors of production are the biggest influence, introducing cyclical movements into labour productivity. More specifically, it can be argued that labour productivity growth shows a pronounced procyclical pattern, because labour is not laid off in proportion to the reduction of the labour input in the production process during recession. This stems from the fact that wage contracts impede the immediate lay-offs that economic downswings might otherwise cause. Moreover, in deep economic recession conditions there is a tendency for capital utilisation to fall below some operational levels, undermining the very efficiency of the production process, and consequently labour productivity (Weisskopf et al., 1983: 398). We contend, therefore, that the capacity utilisation rate is positively related to labour productivity. Time-series data tracing the pattern of the capacity utilisation rate U (expressed as the actual to potential GNP) suggests a rather important role for the increased slack, since 1973, in explaining the slowdown of labour productivity g r ~ w t h . ~

After the oil price shocks of the 1970s, conventional analysis usually explores the impact of energy price variation on productivity. Given that energy is a complementary factor of production (Norsworthy et al., 1979: 412), any increase in the relative price of energy reduces the productivity of labour and capital (Bruno, 1982: 2). Here, however, we do not consider that energy price variation is an important factor in explaining trended productivity in Greece. The reason is that one can hardly associate the relatively high stability in the energy prices over the 1980s with the productivity growth downswing in the same period. Since emphasis has been placed on energy prices in the relevant literature, however, our model assesses the effect of increases in energy prices on labour productivity growth in Greece. We test the supposition that the relative fuel price, F, adversely affects labour productivity.6

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3.2.2. The social structure of accumulation hypothesis

According to the SSA perspective, labour productivity is related to management-labour relations in the production process ( Weisskopf et al., 1983; Bowles et al., 1984:122-149). On one hand, management normally uses work intensity to minimise labour cost. On the other, employees usually seek to work less intensively than management wishes. Contrary to the tenet of harmonious relations between labour and management in mainstream analysis, here the character of conflict- ridden production relations is stressed. Within this framework of power relations, capital control over labour is conditioned by the threat of labour dismissal. In conditions of low unemployment, employees have normally less fear of being fired, knowing that job opportunities are greater. As their relative bargaining power rises, they tend to become more militant, demanding higher wages, better working conditions and challenging perceived abuses of management authority. In these circumstances, despite employers’ overall control, employees can promote their own interests more effectively and constrain management’s ability to raise output per labour-hour employed. The opposite holds true in conditions of high unemployment in the labour market.

Yet the threat of unemployment is conditioned by welfare state functions and related labour market institutions. For instance, a substantial increase in unemployment benefits, other things being equal, will substantially moderate unemployment hardship, from the workers’ standpoint, and thus weaken capital’s leverage over labour.

In approximating empirically this dimension of management’s relative bargaining power, we use the cost-of-job loss variable 5.’ In this study, it consists of three components: (i) the average unemployment rate of the Greek economy; (ii) the difference between employees’ compensation (net of their contribution to social insurance) and unemployment benefits, expressed as a ratio to their pre-job-loss living standard (including employees’ compensation, welfare and medical benefits); and (iii) the ratio of recipients of unemployment benefits to unemployed persons.8 This composite variable measures the employees’ relative reduction in their annual material living standard in the event of being unemployed. The higher the cost of job loss, the greater the employers’ ability to exert pressure on organised labour through the bargaining process. One can argue, therefore, that a relatively high cost of job loss, improving management’s bargaining position, will tend to enhance its ability to intensify labour effort and raise output per labour-hour hired, and vice versa for a relatively low cost of job loss? We postulate a positive relationship between labour productivity growth and cost of job loss. Q Fondarione Giacorno Brodolini 1995.


Equally important in the SSA approach is the analysis of institutionalised social processes required to regulate conflicting interests between management and labour (Gordon, 1980). Social institutions which create relatively stable management-labour relations, and lead to labour peace, are viewed as a basic prerequisite of accelerated economic expansion.

Postwar Greece experienced labour peace throughout the 1950s, the 1960s and early 1970s. It was not the outcome of a bargaining process between management and labour but rather an important socio-political aftermath of the end of the Civil War in 1949. The domination of ultra- conservative governments in the post-Civil War political arena consolidated a state-controlled labour movement. This development, via relevant legislation, led to a regime of imposed industrial peace (Mihail, 1989: 77-87). Labour militancy during that period, naturally, was anaemic as indicated by its empirical proxy of strike activity, S (hours lost in strikes over total work-hours per year).l0 However, surging strike activity since 1974 (the restoration of democracy) emerged from the inherent contradictions of the imposed labour peace. Its demise during the second half of the 1970s was associated with unprecedented strike activity (Mihail, 1993: 292-294), which remained at similarly high levels throughout the 1980s (Ioannou, 1992: 27-28).

Within this historical context, it is very important to examine the relationship between labour militancy and productivity growth. Stable power relations between management and labour, reflected in low levels of strike activity, tend to secure uninterrupted production. In the opposite case, uncontrolled labour militancy, followed by increasing strike activity, tends to disrupt production and slow down productivity growth. We postulate, therefore, an inverse relationship between strike activity and labour productivity growth.

3.2.3. The convergence hypothesis

This hypothesis states that, in comparisons between countries, there is an inverse relationship between productivity growth rates and productivity levels. The rationale of this proposition is that the bigger the economic distance between leader and follower, the larger the gap between advanced and old production technology in the less advanced country, and the faster the follower's potential productivity growth. The basic idea underpinning this argument is that new technologies embodied in the capital stock determine productivity (Abramovitz, 1986). Hence, the replacement of old capital provides the potential for catching up with the leader, where it is assumed that technological breakthroughs are limited by the changes in the frontiers of knowledge.



The convergence is not a warranted process, given technological backwardness. As Abramovitz (1986: 388) observes: “a country’s potential for rapid growth is strong not when it is backward without qualification, but rather when it is technologically backward but socially advanced.” Besides the technological gap, a series of social conditions, labelled “social capability”, must be satisfied. Social capability mainly consists of (i) technical competence related to years of education; and (ii) political, commercial, industrial, and financial institutions specifically configured to adopt continuously advanced technologies and accommodate the operations of modem, large-scale firms.

We find it plausible to suggest that some interaction between technological opportunity and social capability was experienced in postwar Greece. Parallel to the country’s technological backwardness, an institutional setting, consolidated in the 1950s and the early 1960s, facilitated inflows of private fixed capital and stimulated industrial capital accumulation (Mihail, 1989: 77-97; Papandreou, 198 1: 167-1 72). The industralisation process was supported by considerable social investment in infrastructure and public education expenditure.’

This paper tests the hypothesis that the combination of social capability and the s i m c a n t technological gap in the 1950s and 1960s stimulated labour productivity by catch-up. The downswing in productivity growth is associated with factors that impeded the successful exploitation of modem capabilities and a related retarding rate of industrial investment (Mihail, 1989: 135-150).

We capture the catch-up effect on productivity growth with a variable, G, calculated as the logarithm of Greek productivity relative to the USA (Dowrick and Nguyen, 1989).’* Increase in this catch-up variable indicates a tendency towards convergence of productivity levels between Greece and the leading country, the United States. In this case the potential of the follower to maintain high growth rates in productivity declines. Hence, we postulate an inverse relationship between our measure of catch-up and productivity growth.

4. Testing the model

4.1. Regression results

Based on the discussion in the last section, we synthesise the basic arguments of the three theoretical approaches to form an empirical model of labour productivity growth. To this end, we estimate through the ordinary least squares method a series of alternative regression

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Productivity Slowdowit in Postwar Greece 197

equations. Focusing on the non-farm business sector of the Greek economy, the equations were fitted for 1963-1990. The estimation period is limited by the availability of annual data series for our variables. We take changes in natural logarithms of both the dependent and the independent variables in order to transform them into relevant rates of change. Hence, the dependent variable is the rate of change of real output per man-hour employed P.13

Table 2 reports the results of the estimated regressions. We report the results of a very simple conventional model of labour productivity growth in column [2-l]. Here, productivity growth P is postulated to depend on the rate of change of the utilised capital-labour ratio K and the rate of change of relative fuel prices F. It is worth noting that variable K measures the utilised stock of capital of the business sector in order to control for variations in capacity utilisation. The model performs as expected, with the two variables showing the expected signs. The capital intensity variable is significant at the 1% level,

Table 2. Determinants of labour productivity growth in the Greek private sector

Independent variable 12-11 12-21 12-31 12-41

Constant - 0.002 - 0.006 -0.019 -0.016 (0.74) (0.65) (1.55) (1.25)

K 0.787 0.869 0.941 0.900 (6.75) (6.03) (6.83) (5.90)

F - 0.020 (0.53)

U -0.186 (0.96)

G - 0.023 - 0.020 (2.12) ( 1.78)

J 0.042 0.042 (1.77) (1.75)

S - 0.670 -0.613 (2.18) (1.90)

I 0.0 19 (0.65)

R2-adjusted 0.6 18 0.628 0.707 0.700 S.E.R. 0.023 0.022 0.019 0.020 D.W. 1.115 1.300 1.691 1.668

Notes: S.E.R.: Standard Error of Regression. D.W.: Durbin-Watson Statistic. /-statistics in parentheses.



whereas the relative fuel price variable, as it is hypothesised, is insignlficant. The adjusted coefficient of determination is respectable, indicating the importance of the capital intensity determinant.

Next, we replace the insigmficant fuel price variable with the capacity utilisation rate U, a variable used in mainstream analysis of productivity. Column [2-21 reports the results of estimation of the modified equation. The capital intensity indicator has the expected sign and is significant at 1% level, whereas the capacity variable has not the expected sign and is insignificant at 10% level.

Dropping the capacity utilisation indicator, we extend the standard model by adding the empirical proxy of the catch-up hypothesis G, and by allowing for the possibility that the evolution of institutionalised power relations in the labour market affect trended productivity. The latter is empirically proxied both by the institutional variable of the cost-of-job loss 5, and by the measure of strike activity S, indicating the postwar evolution of the labour peace regime. Thus, Column [2-31 reports the estimation results of a model built on hypotheses related to all three theoretical approaches. All four independent variables have the expected sign and are significant at the 5% level (on a one-tailed test). The adjusted coefficient of determination is respectable, indicating that this model accounts for 71% of the total variation in labour productivity growth.

Allowing for the possibility that the investment in infrastructure I has a positive impact on productivity growth (Aschauer, 1989), we then add I to the previous eq~at i0n . l~ In results reported in column [2-41, this alternative specification results in a reduced explanatory power for the model as a whole, and a t-statistic for the coefficient of the infrastructure variable of only 0.65. This suggests that its addition to the last model is not warranted at all. The rest of the results remain robust.

We turn then to the model of column [2-31 that comprises determinants related to all three theoretical approaches to productivity variation. This equation appears to provide a relatively complete empirical account of the trended productivity growth of the postwar Greek economy.

4.2. Tests on residuals and spec@ation

The next step is to establish the congruency of the preferred equation with respect to the data chosen. To this end, we present below the model specification followed by formal tests on residuals:

P = - O.O2C+ 0.94K - 0.02G+ 0.045- 0.67s (1.551) (6.834) (2.122) (1.768) (2.177)



Adjusted R 2 =0.707 S.E.R.= 0.019 D.W. = 1.691 LMX2(2)=0.467 J.B. = 2.967 X 2 arch(2) = 3.230 W=3.874 RAM = 1.633

The definition of the statistics is as follows: R2: Coefficient of multiple determination S.E.R.: Standard error of the regression D.W.: Durbin-Watson test for first-order autocorrelation LM P( 2): Breusch-Godfrey Lagrange multiplier test for second-order residual autocorrelation. Critical value of X2( 2) = 5.99 at the 5% level. J.B.: Jarque-Bera test for residual normality X 2 arch(2): x2-form of Lagrange multiplier test of auto-regressive conditional heteroscedasticity of order 2 W White test for heteroscedasticity and model niis-specification RAM: Ramsey specifiction test of functional form ( x 2 ( 1))

The productivity growth equation displayed above has good statistical properties. The coefficients are highly significant (values of t- statistics for the respective coefficients are presented in parenthesis)

Figure 2. Recursive residuals test

0.00 70 72 74 76 7a ao a2 a4 a6 aa ~

- 0.050

- 0.025

- 0.000

--0.025

-- 0.050

Probability - Recursive residuals -- - - f 2 S.E.


200 Dimitnos Mihail

and all the formal tests on disturbances are satisfactory. The Durbin- Watson test result is indeterminate, however the Breusch-Godfrey test provides no indication of autocorrelated error terms at the 5% level of significance. The residuals are normally distributed according to the Jarque-Bera test. The ARCH test is insignificant. In addition, based on White’s A? test with eight degrees of freedom (critical value: 15.51 at the 5% level), we accept the null hypothesis that the errors are both homoscedastic and independent of the regressors and that the linear specification of the model is correct. The Ramsey test does not detect a specification error in the equation, since the critical value of the x2( 1 ) is greater than the value of the sample statistic (3.84 > 1.63) at the 5% level.

4.3. Stability andpredictive ability tests

The equation under consideration appears to be adequately specified. However, it must also satisfy certain additional conditions in order to be a congruent model characterising the data properties. There are the parameter constancy and the predictive performance of the model.

To this end, first, we apply the Chow test for testing the structural stability of the relationship over the whole estimation period. A potential point at which a break in structure might have taken place is 1982, a year marking the rise of the socialists to power and the beginning of a pronounced pro-labour stance with increasing government interventionism in the labour market accompanied by expansionary income and fiscal policies. The model passes this test successfully, given that the value of the relevant F statistic (2.07) is smaller than the respective critical value of F (2.77) at the 5% level. Second, we turn to the forecast version of the Chow test to assess the predictive performance of the model. The equation estimated for the period 1963-1984 is used to predict the values of the dependent variable in the remaining six data points. The null hypothesis of this test states that the predicted observations come from the same model as that underlying the estimated equation. The test rejects the alternative hypothesis, since the F statistic (0.79) is much smaller than the respective critical value of F (2.70) at the 5% level.

In addition to the Chow tests, a recursive least squares application is testing for structural change in the model. Figure 2 shows the results of the recursive residuals test that displays a plot of the recursive residuals about the zero line. Plus and minus two standard errors are shown at 0 Fondazione Giacomo Brodolini 1995.

Productivity Slowdown in Postwar Greece 20 1

each point. In our case, residuals are well within the standard error bands, suggesting stability in the parameters of the equation.

5. Conclusions

This paper has analysed the two contrasting phases of labour productivity growth in the postwar Greek economy. It has shown that mainstream, institutional and convergence analyses can be articulated to provide a model for explaining the slowdown of labour productivity, a characteristic feature of the Greek economy during the last two decades.

In this synthesis lies the main theoretical implication of our analysis. The mainstream approach to labour productivity has focused on technical factors. Its treatment of the issue is flawed in that it transmutes power relations and conflicting interests into a conflict-free realm of harmonious technical relationships. Instead, we have sought to advance a model that besides technical factors takes into account the fact that economic agents are social beings “with economically important and potentially measurable reactions to their institutional setting and its history” (Weisskopf et al., 1983: 392). We have thus attempted to quantlfy “proximate sources” through which underlying forces such as the joblessness in the labour market and the state of industrial relations help to explain variations in secular labour productivity. Subject to reservations about the inaccuracies of the attempted quantification, the empirical analysis has demonstrated that both cost-of-job loss and labour militancy variables affect labour productivity. In this respect, our empirical model for the Greek case seems to underscore Freeman’s argument that “rather than trying to force all experiences into a single competitive (or other) model, we ought perhaps to explore the domains in which different institutional arrangements produce better results” (Freeman, 1993: 408). In addition, we have sought to incorporate the impact of the technological catch-up process on productivity, which presumably is particularly important for less advanced countries such as Greece. Indeed, there is empirical evidence that retardation of the technological catch-up process has been contributing to the country’s slowdown in productivity.

In many empirical models, including ours, productivity growth is found to be particularly sensitive to changes in the utilised capital- labour ratio. Not surprisingly, Greek economic policy, based on this finding, has so far concentrated heavily on economic measures for enhancing corporate profitability and, consequently, fixed investment.



However, the main policy implication of our empirical analysis is that economic policies guided only by technical factors of the economic growth process will be ineffective. This, after all, indicates the experience of expansionary economic policies of the last two decades in Greece (Mihail, 1989).

We have shown that inherent contradictions in the postwar institutional configurations and especially a good deal of inefficiency in the labour market institutions led to productivity slowdown and economic stagnation. Only in the last few years has this fact been taken into account in preliminary economic policy considerations in restructuring industrial relations on the basis of a new tripartite social contract among management, labour and the government. The other area of institutional reform necessary for the restoration of a convergence process is technological capability and vocational training. Optimistic expectations of sustained labour productivity growth in the next decade are grounded not only in the emergence of a new institutional setting per se but also in the ability of Greece to adjust it efficiently to the institutional environment within the European Union labour markets.

Notes

I The data sources are: OECD, Economic Outlook, December 1977: 140; December 1992; 201, for the growth rates of real GDP; OECD, Economic Outlook, September 1992; 15 1, for the labour productivity growth rates.

2The labour productivity variable is defined as the ratio of gross domestic private non-agricultural business product (at 1970 prices) to the total hours of employment per year in the same sector of the economy. The data source for this variable is Garganas (1992: 254,256). This source provides the number of employees per year. We calculate the total hours of employment per year by multiplying the given employment series by the weeks of work per year (46) and the product by the hours of work per week. The data source of the latter time series is Greek Ministry of Labour, Statistics Department, unpublished data. The data source for Exed investment and gross domestic product is National Statistical Service of Greece, National Accounts of Greece. )See Mihail (1989) for an investment model explaining the industrialisation/

deindustrialisation of the postwar Greek economy. 4This is the ratio of utilised net non-farm private business capital stock, at 1970

prices, to total hours of employment per year. The Exed capital time series is available in Garganas (1992: 256). The capital stock is adjusted by the capacity utilisation ratio defined as the rate of gross national product to the potential one. The data source for the utilisation index is available in Karadeloglou and Koutsouvelis (1991: 181). For the calculation and the data source of the employment series see note 2.

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See note 4, for the data source of the capacity utilisation rate. This is the relative price of fuel and lubricants and is defined as the ratio of the price

deflator of fuel and lubricants to the price deflator of gross domestic product. The data source for the former series is Bank of Greece, Monthly Statistical Bulletin. The source for the latter series is National Statistical Service of Greece, National Accounts of Greece. ’ See Schor and Bowles (1 987) for the theoretical justification and the construction of the cost-of-job-loss indicator as a measure reflecting the bargaining power between management and employees.

sThe data source for the unemployment rate series is Garganas (1992: 266). The data source for employees’ compensation in the non-agricultural sector, employees’ contributions to social insurance, and the unemployment, welfare, and sickness benefits time series is National Statistical Service of Greece, National Accounts of Greece. The data source for the time series of the number of recipients of unemployment benefits is National Statistical Service of Greece, Statistical Yearbook of Greece.

It is argued that, other things being equal, labour intensity varies, directly affecting labour productivity. Lazear (1981: 606-607) puts it eloquently: “Since workers are agents of the owner of the firm, it is not automatic that the interests of workers and owners coincide. Workers, for example, prefer to exert less effort per unit of time worked if their compensation remains unaltered by this effort reduction. Employers, on the other hand, prefer that workers perform at a higher level of effort in order to increase productivity per dollar of wage payment”. Radical economists go further in maintaining that the level of workers’ effort is conditioned by the state of conflictive relations between management and labour. When the relative strength of organised labour (approximated in our analysis by the cost-of-job loss variable) increases, despite management’s overall control, workers’ leverage is enhanced allowing them to improve working conditions and resist speed-up at the workplace, which in turn retards productivity growth (Gordon, 1981; Edwards, 1979: 11-16; Bowles er al., 1984: 126-132). For a critique of the radical approach to productivity slowdown, see Naples (1987: 163-165).

‘OThe data source for the time series of hours lost in strikes is International Labour Office, Yearbook of Labour Statistics.

Public investment in “core” infrastructure such as structures in communications and transportation grew at the impressive rate 16.6% during the industrialisation phase (1956-1973), whereas it fell to minus one percent from 1974 to 1990. As in the case of infrastructure the Greek state during the reconstruction and consolidation period tried to improve the quality of human resources by increasing expenditures in public education. Indeed, the growth rate of the share of education expenditure in total public expenditure (excluding defence expenditure) was 7.9% from 1953 to 1966. Not surprisingly, during the dictatorship period 1967-1973 it was a mere 0.2%. The data source for the real public investment and education expenditure time series is available in Statistical Service of Greece, National Accounts.

l 2 Productivity is approximated by the ratio of real GDP over the number of civilian employees in employment. The data source for the GDP time series of the two countries, at 1985 prices, is OECD, Main Aggregates. The data source for the United States civilian employment is International Labor Office, Labor Force Statistics. The data source for the Greek civilian employment is Garganas (1 992: 257).

l 3 See note 2, for the definition and the data source of the labour productivity variable. l 4 The variable I is defined as the growth rate of public investment in communications

and transportation at constant prices. The data source for this time series is available in National Statistical Service of Greece, National Accounts.



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