The productivity puzzle and misallocation: an Italian perspective

Sara Calligaris, Massimo Del Gatto, Fadi Hassan, Gianmarco Ottaviano and Fabiano Schivardi

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: Productivity has recently slowed down in many economies around the world. A crucial challenge in understanding what lies behind this “productivity puzzle” is the still short time span for which data can be analysed. An exception is Italy, where productivity growth started to stagnate 25 years ago. The Italian case can therefore offer useful insights to understand the global productivity slowdown. We find that resource misallocation has played a sizeable role in slowing down Italian productivity growth. If misallocation had remained at its 1995 level, in 2013 Italy’s aggregate productivity would have been 18% higher than its actual level. Misallocation has mainly risen within sectors rather than between them, increasing more in sectors where the world technological frontier has expanded faster. Relative specialization in those sectors explains the patterns of misallocation across geographical areas and firm size classes. The broader message is that an important part of the explanation of the productivity puzzle may lie in the rising difficulty of reallocating resources across firms within sectors where technology is changing faster rather than between sectors with different speeds of technological change.

Keywords: missallocation; TFP; productivity; puzzle; Italy (search for similar items in EconPapers)
JEL-codes: D24 O11 O47 (search for similar items in EconPapers)
Date: 2018-09-21
New Economics Papers: this item is included in nep-bec, nep-eff and nep-fdg
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Citations: View citations in EconPapers (31)

Published in Economic Policy, 21, September, 2018. ISSN: 0266-4658

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Related works:
Journal Article: The productivity puzzle and misallocation: an Italian perspective (2018)
Working Paper: The Productivity Puzzle and Misallocation: an Italian Perspective (2018)
Working Paper: The productivity puzzle and misallocation: an Italian perspective (2017)
Working Paper: The Productivity Puzzle and Misallocation: an Italian Perspective (2017)
Working Paper: The productivity puzzle and misallocation: an Italian perspective (2017)
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