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Italy’s Productivity Conundrum. A Study on Resource Misallocation in Italy

Author

Listed:
  • S. Calligaris
  • M. Del Gatto
  • F. Hassan
  • G.I.P. Ottaviano
  • F. Schivardi
Abstract
This paper provides a detailed analysis of the patterns of misallocation in Italy since the early 1990s. In particular, we show that the extent of misallocation has substantially increased since 1995, and that this increase can account for a large fraction of the Italian productivity slowdown since then. We gather evidence on the evolution of firm level misallocation both within and between various categories of firms, in particular those based on geographic areas, industries, and firm size classes. We do so both for firms in manufacturing and for firms in non-manufacturing. Overall, looking at the distribution of firm productivity, we uncover a thickening of the left tail as the share of firms with low productivity has increased over the period. This implies not only a decrease in average firm productivity, but also an increase in its dispersion. We show that the increase in misallocation has come mainly from higher dispersion of productivities within different firm size classes and geographical areas rather than between them. Crucially, we highlight that rising misallocation has hit firm categories that are traditionally the spearhead of the Italian economy such as firms in the Northwest and big firms. We also produce evidence that, while the 2008 crisis seems to have triggered, at least until 2013, a ‘cleansing effect’ of the least productive firms in the manufacturing sector as a whole, in non-manufacturing industries one observes the survival of firms with even lower productivities than they used to have. Finally, we propose a novel methodology to assess which firm characteristics are more strongly associated with misallocation. In particular, we investigate the role of corporate ownership/control and governance, finance, workforce composition, internationalisation, cronyism and innovation. Together with the other findings already highlighted, the analysis of those ‘markers’ provides the ground for a policy-oriented discussion on how to tackle the Italian productivity slowdown.

Suggested Citation

  • S. Calligaris & M. Del Gatto & F. Hassan & G.I.P. Ottaviano & F. Schivardi, 2016. "Italy’s Productivity Conundrum. A Study on Resource Misallocation in Italy," European Economy - Discussion Papers 030, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    • Handle: RePEc:euf:dispap:030
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    Citations

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    Cited by:

    1. Di Mauro, Filippo & Hassan, Fadi & Ottaviano, Gianmarco I. P., 2018. "Financial markets and the allocation of capital: the role of productivity," LSE Research Online Documents on Economics 91676, London School of Economics and Political Science, LSE Library.
    2. Jan Hagemejer & Peter Szewczyk & Joanna Tyrowicz, 2018. "Misallocations go a long way: evidence from firm-level data," GRAPE Working Papers 31, GRAPE Group for Research in Applied Economics.
    3. Aleberto Alesina & Guido Tabellini & Francesco Trebbi, 2017. "Is Europe an Optimal Political Area?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 48(1 (Spring), pages 169-234.
    4. Cappelletti, Matilde & Giuffrida, Leonardo M., 2021. "Procuring survival," ZEW Discussion Papers 21-093, ZEW - Leibniz Centre for European Economic Research.
    5. Fabiano Schivardi & Enrico Sette & Guido Tabellini, 2022. "Credit Misallocation During the European Financial Crisis," The Economic Journal, Royal Economic Society, vol. 132(641), pages 391-423.
    6. Francesco Manaresi & Nicola Pierri, 2018. "Credit supply and productivity growth," Temi di discussione (Economic working papers) 1168, Bank of Italy, Economic Research and International Relations Area.
    7. Berlingieri, Giuseppe & Blanchenay, Patrick & Criscuolo, Chiara, 2024. "The great divergence(s)," Research Policy, Elsevier, vol. 53(3).
    8. Pellegrino, Bruno & Zingales, Luigi, 2017. "Diagnosing the Italian Disease," Working Papers 269, The University of Chicago Booth School of Business, George J. Stigler Center for the Study of the Economy and the State.
    9. Krahé, Max, 2023. "Italiens Stagnation verstehen," Papers 277907, Dezernat Zukunft - Institute for Macrofinance, Berlin.
    10. Dino Pinelli & Roberta Torre & Lucianajulia Pace & Laura Cassio & Alfonso Arpaia, 2017. "The Recent Reform of the Labour Market in Italy: A Review," European Economy - Discussion Papers 072, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    11. Matilde Cappelletti & Leonardo M. Giuffrida & Gabriele Rovigatti, 2022. "Procuring Survival," CESifo Working Paper Series 10124, CESifo.
    12. Fabiano Schivardi & Tom Schmitz, 2020. "The IT Revolution and Southern Europe’s Two Lost Decades [Lack of Selection and Limits to Delegation: Firm Dynamics in Developing Countries]," Journal of the European Economic Association, European Economic Association, vol. 18(5), pages 2441-2486.
    13. Caglayan, Mustafa & Flamini, Alessandro & Jahanshahi, Babak, 2021. "Hindering human capital accumulation: A hidden cost of the silent mafia?," Journal of Economic Behavior & Organization, Elsevier, vol. 188(C), pages 828-845.
    14. Cirillo, Valeria & Fanti, Lucrezia & Mina, Andrea & Ricci, Andrea, 2023. "The adoption of digital technologies: Investment, skills, work organisation," Structural Change and Economic Dynamics, Elsevier, vol. 66(C), pages 89-105.
    15. Pierluigi Toma, 2020. "Size and productivity: a conditional approach for Italian pharmaceutical sector," Journal of Productivity Analysis, Springer, vol. 54(1), pages 1-12, August.
    16. A. Arrighetti & F. Landini, 2018. "Eterogeneità delle imprese e stagnazione del capitalismo italiano," Economics Department Working Papers 2018-EP01, Department of Economics, Parma University (Italy).
    17. Giovanni Dosi & Dario Guarascio & Andrea Ricci & Maria Enrica Virgillito, 2021. "Neodualism in the Italian business firms: training, organizational capabilities, and productivity distributions," Small Business Economics, Springer, vol. 57(1), pages 167-189, June.
    18. Valeria Cirillo & Lucrezia Fanti & Andrea Mina & Andrea Ricci, 2021. "Digitalizing Firms: Skills, Work Organization and the Adoption of New Enabling Technologies," LEM Papers Series 2021/04, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    19. Oreste Napolitano & Mariafortuna Pietroluongo & Konstantinos Kounetas, 2018. "Stochastic Convergence or Divergence of Total Factor Productivity and GDP of Italian Regions. Re-examing the Evidence," Economics Bulletin, AccessEcon, vol. 38(4), pages 1857-1863.
    20. Francesco Manaresi & Nicola Pierri, 2018. "Credit supply and productivity growth," BIS Working Papers 711, Bank for International Settlements.
    21. Matteo Bugamelli & Francesca Lotti & Monica Amici & Emanuela Ciapanna & Fabrizio Colonna & Francesco D�Amuri & Silvia Giacomelli & Andrea Linarello & Francesco Manaresi & Giuliana Palumbo & Filippo , 2018. "Productivity growth in Italy: a tale of a slow-motion change," Questioni di Economia e Finanza (Occasional Papers) 422, Bank of Italy, Economic Research and International Relations Area.
    22. Francesco Manaresi & Mr. Nicola Pierri, 2019. "Credit Supply and Productivity Growth," IMF Working Papers 2019/107, International Monetary Fund.
    23. Guarascio, Dario & Gualtieri, Valentina & Quaranta, Roberto, 2018. "Does routinization affect occupation dynamics? Evidence from the ‘Italian O*Net’ data," MPRA Paper 89585, University Library of Munich, Germany.
    24. Fazio, Giorgio & Piacentino, Davide, 2018. "Convergence analysis for hierarchical longitudinal data," Economic Modelling, Elsevier, vol. 73(C), pages 89-99.
    25. Bańbura, Marta & Albani, Maria & Ambrocio, Gene & Bursian, Dirk & Buss, Ginters & de Winter, Jasper & Gavura, Miroslav & Giordano, Claire & Júlio, Paulo & Le Roux, Julien & Lozej, Matija & Malthe-Thag, 2018. "Business investment in EU countries," Occasional Paper Series 215, European Central Bank.

    More about this item

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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