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Misallocation and Total Factor Productivity in Italy: Evidence from Firm-Level Data

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  • Sara Calligaris

Abstract

Over the last two decades, total factor productivity (TFP) in Italy decreased by 0.2% per year, while increasing on average in the Euro-area countries. This decline suggests the existence of large inefficiencies in the allocation of resources, making the Italian case particularly interesting and suitable in order to study the role of misallocation. In this article, I quantify the within-industry misallocation of inputs in Italy over the period 1993–2011, by applying the Hsieh and Klenow's methodology. Using a micro-level longitudinal dataset of Italian manufacturing firms, I find that, in the hypothetical absence of distortions, aggregate TFP in manufacturing would be boosted by 58% in 1993, by 67% in 2006 and by 80% in 2011. This leads to a twofold conclusion: first, misallocation plays a crucial role in determining the inefficiency level of the Italian manufacturing sector; second, misallocation has increased over time. Given the magnitude of the results obtained and the policy implications related thereto, I take a step ahead by checking to what extent the degree of misallocation can be attributed to specific characteristics of the Italian firms: it emerges that misallocation is higher for firms located in the south and at low-technological intensity, as well as for small or young firms.

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  • Sara Calligaris, 2015. "Misallocation and Total Factor Productivity in Italy: Evidence from Firm-Level Data," LABOUR, CEIS, vol. 29(4), pages 367-393, December.
  • Handle: RePEc:bla:labour:v:29:y:2015:i:4:p:367-393
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    File URL: http://hdl.handle.net/10.1111/labr.12067
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    Cited by:

    1. Elisa Gamberoni & Claire Giordano & Paloma Lopez-Garcia, 2016. "Capital and labour (mis)allocation in the euro area: Some stylized facts and determinants," Questioni di Economia e Finanza (Occasional Papers) 349, Bank of Italy, Economic Research and International Relations Area.
    2. repec:aea:jecper:v:31:y:2017:i:3:p:151-74 is not listed on IDEAS
    3. T. Libert, 2017. "Misallocation Before, During and After the Great Recession," Working papers 658, Banque de France.
    4. Dias, Daniel A. & Robalo Marques, Carlos & Richmond, Christine, 2016. "Misallocation and productivity in the lead up to the Eurozone crisis," Journal of Macroeconomics, Elsevier, vol. 49(C), pages 46-70.
    5. Sara Calligaris & Massimo Del Gatto & Fadi Hassan & Gianmarco I P Ottaviano & Fabiano Schivardi & Tommaso MonacelliManaging Editor, 2018. "The productivity puzzle and misallocation: an Italian perspective," Economic Policy, CEPR;CES;MSH, vol. 33(96), pages 635-684.
    6. Diego Restuccia & Richard Rogerson, 2017. "The Causes and Costs of Misallocation," Journal of Economic Perspectives, American Economic Association, vol. 31(3), pages 151-174, Summer.
    7. Cette, Gilbert & Fernald, John & Mojon, Benoît, 2016. "The pre-Great Recession slowdown in productivity," European Economic Review, Elsevier, vol. 88(C), pages 3-20.
    8. Doan Thi Thanh Ha & Kozo Kiyota & Kenta Yamanouchi, 2016. "Misallocation and Productivity: The Case of Vietnamese Manufacturing," Asian Development Review, MIT Press, vol. 33(2), pages 94-118, September.
    9. Fabiano Schivardi & Tom Schmitz, 2018. "The IT Revolution and Southern Europe’s Two Lost Decades," EIEF Working Papers Series 1805, Einaudi Institute for Economics and Finance (EIEF), revised Mar 2018.
    10. Patrice Ollivaud & Yvan Guillemette & David Turner, 2018. "Investment as a transmission mechanism from weak demand to weak supply and the post-crisis productivity slowdown," OECD Economics Department Working Papers 1466, OECD Publishing.
    11. repec:mje:mjejnl:v:14:y:2018:i:2:p:143-153 is not listed on IDEAS
    12. Maurice Bun & Jasper de Winter, 2019. "Measuring trends and persistence in capital and labor misallocation," DNB Working Papers 639, Netherlands Central Bank, Research Department.
    13. repec:kap:jproda:v:49:y:2018:i:2:d:10.1007_s11123-018-0530-1 is not listed on IDEAS
    14. A. Arrighetti & F. Landini, 2018. "Eterogeneità delle imprese e stagnazione del capitalismo italiano," Economics Department Working Papers 2018-EP01, Department of Economics, Parma University (Italy).
    15. Matteo Bugamelli & Francesca Lotti & Monica Amici & Emanuela Ciapanna & Fabrizio Colonna & Francesco D’Amuri & Silvia Giacomelli & Andrea Linarello & Francesco Manaresi & Giuliana Palumbo & Filippo Sc, 2018. "Productivity growth in Italy: a tale of a slow-motion change," Questioni di Economia e Finanza (Occasional Papers) 422, Bank of Italy, Economic Research and International Relations Area.

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