A macroeconomic regression analysis of the European construction industry

Abstract

Purpose – The purpose of this paper is to analyse the international construction sector from a macroeconomic point of view through production functions. The aim is to contribute additional knowledge on the European construction sector, highlighting differences in the industry among European countries Design/methodology/approach – In order to analyse the sector panel, data from 1996-2005 for nine European countries were used. Raw data were obtained from Eurostat (Bach Project). Variables for the production functions were chosen after a correlation analysis. Annual turnover was taken as the dependent variable, whereas total assets and personnel costs were the independent variables. The econometric regression models considered were linear (bivariate and multivariate) and logarithmic (Cobb-Douglas). Findings – In spite of the limitations stated, there are some factors that can explain the results obtained, such as the diverse preponderance of small and medium enterprises and the different roles played by informal economy, migration and subcontracting in each of the countries. Research limitations/implications – Data collected by Eurostat are provided by the enterprises voluntarily. This implies a bias in the representativeness of the data. Thus, the discrepancies and inconsistencies in the results obtained are a direct consequence of the data limitations. Furthermore, the regression models obtained should be tested using future data to predict the behaviour of the construction industry in each one of the countries. Originality/value – The use of production functions in the construction industry is a novel approach that should be further developed to gather more precise information on the behaviour of the sector.