Diagnosing the Italian Disease

72 Pages Posted: 23 Oct 2017 Last revised: 17 Aug 2018

See all articles by Bruno Pellegrino

Bruno Pellegrino

University of California, Los Angeles (UCLA), Anderson School of Management

Luigi Zingales

University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Date Written: July 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 2018). Available at SSRN: https://ssrn.com/abstract=3057451 or http://dx.doi.org/10.2139/ssrn.3057451

Bruno Pellegrino (Contact Author)

University of California, Los Angeles (UCLA), Anderson School of Management ( email )

Los Angeles, CA
United States
3122578888 (Phone)

HOME PAGE: http://www.brunopellegrino.com

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)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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