Long-Run Trends in Italian Productivity

33 Pages Posted: 5 Dec 2017

See all articles by Claire Giordano

Claire Giordano

Bank of Italy

Gianni Toniolo

Centre for Economic Policy Research (CEPR); LUISS Guido Carli University - LUISS Business school

Francesco Zollino

Bank of Italy

Date Written: November 29, 2017

Abstract

Based on updated datasets of value added and of labour and capital inputs, this paper provides a reassessment of the proximate causes of Italy’s economic development since its political unification in 1861 to 2016. Italy’s pre-WWII economy featured weak productivity growth, with the exception of the Giolitti era and the 1920s. Italy then embarked on an exceptional catching-up process relative to the technological leaders during the Golden Age. Compared with the pre-WWII years, when the Italian economy was held back by slow productivity growth in the large agricultural sector, the catching-up process during the Golden Age was propelled by the rapid shift of labour out of agriculture. As in many countries, this rapid growth in productivity could not be sustained after 1973, but the further slowdown since the 1990s has been more pronounced in Italy than elsewhere. The disappointing performance of the Italian economy since the early 1990s is largely explained by slow labour productivity growth in the now dominant services sector and by sluggish aggregate total factor productivity. Labour productivity developments actually turned negative during the protracted crisis following the global financial turmoil, due to the decline in capital accumulation and in total factor productivity. Since the start of the recovery in 2013, while total factor productivity has returned to a moderately positive trend, the capital stock has not fully overcome the legacy of the crisis.

Keywords: labour productivity, sectorial reallocation, growth accounting

JEL Classification: N10, N30, O47, O57

Suggested Citation

Giordano, Claire and Toniolo, Gianni and Zollino, Francesco, Long-Run Trends in Italian Productivity (November 29, 2017). Bank of Italy Occasional Paper No. 406. Available at SSRN: https://ssrn.com/abstract=3082193 or http://dx.doi.org/10.2139/ssrn.3082193

Claire Giordano

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Gianni Toniolo

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

LUISS Guido Carli University - LUISS Business school

Viale Pola 12
Rome, 00198
Italy

Francesco Zollino (Contact Author)

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

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