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Labor Market Implications for Green Investments and Carbon Pricing in Spain green policies; input-output matrix; employment; occupations; skills ABSTRACT: We provide a tractable framework for assessing the labor market impact of policies that support the green transition of the Spanish economy, taking into account input-output linkages. We present illustrative examples that quantify changes in sectoral employment, occupations and skills stemming from two different green policies: (i) the announced green investments in the recovery plan; and (ii) an increase in carbon pricing and an expansion of the EU Emission Trading System (ETS). Our analysis shows that the labor market impact of these two policies is net positive, although the results depend on the design of the green policies, particularly on the use of the proceeds from the increase in carbon pricing. Strengthening active labor market policies, with a focus on training, and complementing them with education policies such as the expansion of vocational training, would facilitate the transition of workers from shrinking to expanding sectors.

Spain

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We provide a tractable framework for assessing the labor market impact of policies that support the green transition of the Spanish economy, taking into account input-output linkages. We present illustrative examples that quantify changes in sectoral employment, occupations and skills stemming from two different green policies: (i) the announced green investments in the recovery plan; and (ii) an increase in carbon pricing and an expansion of the EU Emission Trading System (ETS). Our analysis shows that the labor market impact of these two policies is net positive, although the results depend on the design of the green policies, particularly on the use of the proceeds from the increase in carbon pricing. Strengthening active labor market policies, with a focus on training, and complementing them with education policies such as the expansion of vocational training, would facilitate the transition of workers from shrinking to expanding sectors.

Spain

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This 2022 Article IV Consultation highlights that economic activity in Spain has remained resilient despite the new headwinds posed by the fallout of Russia’s invasion of Ukraine. Strong rebound in tourism and other services have supported growth this year. Policies to mitigate the surge in energy costs should shift to more targeted income support to the vulnerable, allowing price signals to incentivize demand and supply adjustments, while containing fiscal costs. The deterioration of the macroeconomic outlook and the rise in interest rates will likely erode borrowers’ repayment capacity. Banks need to maintain prudent levels of forward-looking provisions and should be encouraged to use capital buffers in case downside risks materialize. Spain is making progress on its ambitious reform agenda and the execution of investments under the Recovery, Transformation and Resilience Plan. Establishing a system of regular, data-driven, outcome-based evaluation of the reforms’ effectiveness will be important to ensure that they achieve the desired outcomes.

Spain

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This Selected Issues paper focuses on labor productivity dynamics in Spain. Labor productivity has been a long-standing structural challenge in Spain. Productivity performance has been weak across several dimensions: labor productivity levels are significantly lower than in some peer economies, its growth rate has been low and not favored convergence, and differences in output per hour worked across Spanish regions is considerable. In the aftermath of the Global Financial Crisis, labor productivity in Spain exhibited a counter-cyclical pattern driven by the large reduction in employment. Total factor productivity (TFP) has been consistently low and lagging peers for decades. Sustained policy focus on raising productivity will be important to increase living standards, help rebuild fiscal buffers and make growth more inclusive. The empirical analysis benefits from the rich information in firm financial statements to provide a deep-dive study on differences across firms based on their size and age. Firm-level characteristics, such as balance sheet health and growth potentials, have also shown to be significant determinants for firm investment.

Spain

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Spain