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OECD Territorial Reviews: Madrid, Spain 2007

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Madrid has experienced impressive dynamic economic growth in recent years, making the best of the positive business cycle in Spain. The capital region absorbs more than a half of the total FDI in Spain and has extended its economic relations with Latin American countries. Growth has occurred largely in the service sector (financial, banking, business services) as well as in logistics (Madrid Barajas Airport is the largest employer in the region). The large investment in public goods, and particularly in transportation infrastructure and cultural amenities, has contributed to attracting firms and workers, creating a virtuous cycle of accumulated wealth. Unemployment has reached a low level (6.5% in 2006) and the growth rate has surpassed the national average as well as the average for OECD metro-regions. There is, however, a concern with how to sustain this positive economic path in the long run. The main challenges to be addressed include a relatively low productivity level, insufficient specialisation in high-value added manufacturing activities, a low innovation capacity, job-skills mismatches (especially for immigrants), transport congestion and housing rental shortage. Public policy making and the governance framework have evolved to provide the metro-region with many of the institutional resources that are needed to make decisions and effectively implement public policies. However, some adaptations will be necessary to effectively address the forthcoming challenges.

The Territorial Review of Madrid is integrated into a series of thematic reviews on metropolitan regions undertaken by the OECD Territorial Development Policy Committee. The overall aim of these case studies is to draw and disseminate horizontal policy recommendations for national governments.

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Madrid: An Emerging Hub in the Global Economy

The Madrid metropolitan area has reached a high level of international competitiveness during the last decade. Once a regional capital with a central role in Spain but relatively isolated from the rest of Europe, Madrid is becoming a powerful hub within the global economy. Over the last eight years, the economic growth of the metro region has been more than double the average of the euro zone. Madrid has become a large metropolitan region, home to 3 million workers and more than 450 000 firms, several of which are headquarters of some of the most competitive companies in the world. Broadly speaking, there are three factors underpinning this good performance: (i) a large supply of labour provided both by immigrants (among which a large number of Spanish-speaking natives from South America) and young educated fixedterm workers; (ii) the presence of first-class transportation facilities, such as Barajas airport, that enable Madrid to mitigate the challenge of being a peripheral European region; and (iii) the growth dynamic itself, in response to the stability of the economy due to the introduction of the euro, which has generated positive expectations among population promoting local demand. Of course, behind the regional good performance there is a “country effect” that proves difficult to isolate from the local comparative advantage. Although this phenomenon can be observed in many OECD metro-regions, in Madrid it has a larger importance. The historical concentration of the national investment within the Madrid Metro-region has played a key role in promoting Madrid’s international accessibility as well as the localisation of some knowledge intensive industries such as aerospace.

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