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The productivity puzzle and misallocation: an Italian perspective

Calligaris, Sara, Del Gatto, Massimo, Hassan, Fadi, Ottaviano, Gianmarco I. P. and Schivardi, Fabiano (2018) The productivity puzzle and misallocation: an Italian perspective. Economic Policy. ISSN 0266-4658

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Identification Number: 10.1093/epolic/eiy014

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.

Item Type: Article
Official URL: https://academic.oup.com/economicpolicy
Additional Information: © 2018 CEPR, CESifo, Sciences Po
Divisions: Economics
Subjects: H Social Sciences > HC Economic History and Conditions
JEL classification: D - Microeconomics > D2 - Production and Organizations > D24 - Production; Cost; Capital and Total Factor Productivity; Capacity
O - Economic Development, Technological Change, and Growth > O1 - Economic Development > O11 - Macroeconomic Analyses of Economic Development
O - Economic Development, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O47 - Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output (Income) Convergence
Sets: Departments > Economics
Collections > Economists Online
Date Deposited: 27 Sep 2018 12:45
Last Modified: 20 Feb 2019 06:53
URI: http://eprints.lse.ac.uk/id/eprint/90271

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