Madrid: An Emerging Hub in the Global Economy

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Abstract:

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.

Document Type: Review Article

Publication date: September 1, 2007

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