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The effect of public sector efficiency on firm-level productivity growth: The Italian case

Author

Listed:
  • Milenko Fadic
  • Paula Garda
  • Mauro Pisu

Abstract

This paper investigates the causal effect of public administration efficiency on firm-level productivity. To this purpose, we combine newly available data from Italy on public administration efficiency of subnational governments with geo-localised firm-level data for the years 2004-2014. Italy provides a relevant setting to examine the relationship between public administration efficiency and firm productivity because of large and persistent spatial disparities in economic performance and local administrative capacity. The identification strategy exploits discontinuities that occur in local public-administration efficiency across provincial borders. The results suggest that local public administration efficiency has a large effect on firms’ productivity growth. Increasing local public administration efficiency from the 25th percentile to the 75th percentile would raise the firm-level labour productivity in Italy by 2.4 percentage points.

Suggested Citation

  • Milenko Fadic & Paula Garda & Mauro Pisu, 2019. "The effect of public sector efficiency on firm-level productivity growth: The Italian case," OECD Economics Department Working Papers 1573, OECD Publishing.
    • Handle: RePEc:oec:ecoaaa:1573-en
    DOI: 10.1787/6d20b56d-en
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    Cited by:

    1. Federica Daniele & Stefano Clò & Enza Maltese & Alessandra Pasquini, 2022. "Unburdening regulation: the impact of regulatory simplification on photovoltaic adoption in Italy," Working Papers - Economics wp2022_03.rdf, Universita' degli Studi di Firenze, Dipartimento di Scienze per l'Economia e l'Impresa.
    2. Igor Fedotenkov & Rangan Gupta, 2021. "The effects of public expenditures on labour productivity in Europe," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 48(4), pages 845-874, November.
    3. Daniele, Federica & Pasquini, Alessandra & Clò, Stefano & Maltese, Enza, 2023. "Unburdening regulation: The impact of regulatory simplification on photovoltaic adoption in Italy," Energy Economics, Elsevier, vol. 125(C).

    More about this item

    Keywords

    firm growth; firm performance; interjurisdictional differentials; local government expenditures; local public services; productivity; public administration; public goods; public services;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
    • H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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