Trends of labour productivity in Italy: a study with panel co‐integration methods

Abstract

Purpose -The main aim of this paper is to examine labour productivity trends in Italy over the period . Design/methodology/approach -To this end, relying on recent developments in the analysis of non-stationary dependent panels, the paper develops a new method for estimating total factor productivity (TFP) trends. Findings -The conclusions confirm the view that the recent decline in Italian labour productivity growth is mostly due to a widespread fall in TFP growth.Research limitations/implications -The main assumption underlying the proposed TFP estimation method is that technology growth is driven by a single trend common to all units included in the panel (industries, regions or countries). Originality/value -The paper provides two distinct contributions: empirically, it provides robust evidence that TFP slow-down is the main cause of recent negative trends in labour productivity in Italy. Methodologically, the paper proposes an approach to estimating TFP that enjoys several advantages: only basic data for input and output flows are needed, the non-stationary nature of the data is explicitly taken into account, and confidence intervals for TFP growth can be computed. This method can thus be easily applied to many routinely available datasets, to either corroborate existing growth accounting estimates or to obtain previously unavailable estimates.

Dynamic Approaches to Global Economic Challenges

“…10 For a review of this literature, see for example, Amighini and Chiarlone (2004) and Federico and Wolf (2012) for a more historical perspective. Faini and Sapir (2005) support this view by calculating the Balassa index of Revealed Comparative Advantage for Italy and by studying its evolution through time. 11 Among the first to believe that the specialization pattern has become "inadequate" are Onida (1999) and Trento (2003).…”

“…of the developing countries in the international arena. Faini 2003;Faini and Sapir 2005;Boeri et al 2005), and, again the insufficient average size of Italian firms. Faini and Sapir (2005) support this view by calculating the Balassa index of Revealed Comparative Advantage for Italy and by studying its evolution through time.…”

“…Parisi et al 2006;Fachin and Gavosto 2010). Faini and Sapir 2005) consider the simple scarcity of human capital in a company as a major obstacle for the adoption of the modern ICT. During the nineties, in particular, the business R&D efforts in the nineties showed a net drop in comparison to the previous decade.…”

“…This successful performance was the outcome of a long period of sustained growth, which had started immediately after the end of WW2 and continued until the late eighties. According to some authors like for example Faini and Sapir (2005) and Ciocca (2010), this might be a basic reason for the slow pace of adoption of the new information and communication technologies (ICT) by Italian firms. Starting in that year however, the so-called "Italian Economic Miracle" (Nardozzi 2003) seemed to vanish quickly, and a long period of stagnation took its place.…”

The Impact of the Eurozone Crisis on a Periphery Country: The Case of Italy

“…As to the specific causes which explain the poor growth record experienced by Italy within the framework of eurozone, further detailed studies focus on structural factors such as the decrease in labour productivity and total factor productivity (Daveri and Jona-Lasinio 2005), labour market reforms (Boeri and Garibaldi 2007), or inadequate investment in R&D and innovation (Fachin and Gavosto 2010).…”