Diagnosing the Italian Disease

82 Pages Posted: 23 Oct 2017 Last revised: 7 May 2019

See all articles by Bruno Pellegrino

Bruno Pellegrino

Columbia University - Columbia Business School; University of Chicago - George J. Stigler Center for the Study of the Economy and the State; CESifo (Center for Economic Studies and Ifo Institute)

Luigi Zingales

University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

Date Written: July 1, 2018

Abstract

We investigate why Italy’s labor productivity stopped growing in the mid-1990s. We find no evidence that this slowdown is due to competition from China, Italy’s protective labor regulations or increasingly inefficient institutions. By contrast, the data suggest that Italy’s slowdown was more likely caused by the failure of its firms to take full advantage of the ICT revolution. While many institutional features can account for this failure, a prominent one is the lack of meritocracy in the selection and rewarding of managers. Italian firms lag in the adoption of meritocratic management, leading to lower ICT usage. We conclude that familism and cronyism are the ultimate causes of the Italian disease.

Keywords: Productivity, Italy, Cronyism, Growth, Management, Institutions, ICT, IT

JEL Classification: O3, O4

Suggested Citation

Pellegrino, Bruno and Zingales, Luigi, Diagnosing the Italian Disease (July 1, 2018). Available at SSRN: https://ssrn.com/abstract=3057451 or http://dx.doi.org/10.2139/ssrn.3057451

Bruno Pellegrino (Contact Author)

Columbia University - Columbia Business School ( email )

3022 Broadway
New York, NY 10027
United States

University of Chicago - George J. Stigler Center for the Study of the Economy and the State ( email )

Walker Hall
Chicago, IL 60637
United States

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

Luigi Zingales

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-702-3196 (Phone)
773-834-2081 (Fax)

National Bureau of Economic Research (NBER)

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Centre for Economic Policy Research (CEPR)

London
United Kingdom

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
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1000 Brussels
Belgium

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