Recent trends in economic activity and TFP in Italy with a focus on embodied technical progress
Alessandro Mistretta and
Francesco Zollino ()
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Francesco Zollino: Bank of Italy
No 1204, Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area
In this paper we provide fresh evidence on TFP performance in the Italian economy since 1995, taking into account the changing composition of primary inputs across different capital goods and employment skills, as well as technical progress embodied in different vintages of the productive assets. We first estimate a technical depreciation rate by using individual data on Italian industrial firms. We then obtain an experimental measure of the capital stock adjusted for technical efficiency, by augmenting the standard depreciation rate by our own estimate of technical depreciation (about 5 per cent per year). Once we introduce our measure of capital stock in a standard growth accounting exercise, we find a less dismal performance of the Italian TFP than usually estimated. Focusing on the years between 2007 and 2016, the upward correction in TFP amounts to around 1.5 percentage points in the overall period for the total economy and to about 2.5 percentage points when only considering manufacturing. These findings shed a somewhat more positive light on future TFP developments in Italy, suggesting a more rapid increase of potential output than otherwise estimated. In addition, the efficiency of installed capital might soon return to growth, as the expected recovery of investment results in the replacement of old vintages with new and more technically advanced ones.
Keywords: TFP; technical progress; embodied technology (search for similar items in EconPapers)
JEL-codes: D24 L60 O3 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eec and nep-eff
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Journal Article: Recent Trends in Economic Activity and TFP in Italy with a Focus on Embodied Technical Progress (2021)
Journal Article: Recent Trends in Economic Activity and TFP in Italy with a Focus on Embodied Technical Progress
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Persistent link: https://EconPapers.repec.org/RePEc:bdi:wptemi:td_1204_18
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