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Trends of labour productivity in Italy: a study with panel co-integration methods

  • Stefano Fachin
  • Andrea Gavosto

Purpose – The main aim of this paper is to examine labour productivity trends in Italy over the period 1981-2004. Design/methodology/approach – To this end, relying on recent developments in the analysis of non-stationary dependent panels, the paper develops a new method for estimating total factor productivity (TFP) trends. Findings – The conclusions confirm the view that the recent decline in Italian labour productivity growth is mostly due to a widespread fall in TFP growth. Research limitations/implications – The main assumption underlying the proposed TFP estimation method is that technology growth is driven by a single trend common to all units included in the panel (industries, regions or countries). Originality/value – The paper provides two distinct contributions: empirically, it provides robust evidence that TFP slow-down is the main cause of recent negative trends in labour productivity in Italy. Methodologically, the paper proposes an approach to estimating TFP that enjoys several advantages: only basic data for input and output flows are needed, the non-stationary nature of the data is explicitly taken into account, and confidence intervals for TFP growth can be computed. This method can thus be easily applied to many routinely available datasets, to either corroborate existing growth accounting estimates or to obtain previously unavailable estimates.

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Article provided by Emerald Group Publishing in its journal International Journal of Manpower.

Volume (Year): 31 (2010)
Issue (Month): 7 (November)
Pages: 755-769

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Handle: RePEc:eme:ijmpps:v:31:y:2010:i:7:p:755-769
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References listed on IDEAS
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  1. Bruno Giancarlo & Edoardo Otranto, 2004. "Dating the Italian BUsiness Cycle: A Comparison of Procedures," ISAE Working Papers 41, ISTAT - Italian National Institute of Statistics - (Rome, ITALY).
  2. Psaradakis, Zacharias, 2001. "On bootstrap inference in cointegrating regressions," Economics Letters, Elsevier, vol. 72(1), pages 1-10, July.
  3. Pesaran, M.H., 2003. "A Simple Panel Unit Root Test in the Presence of Cross Section Dependence," Cambridge Working Papers in Economics 0346, Faculty of Economics, University of Cambridge.
  4. Yan Shen & Cheng Hsiao & Hiroshi Fujiki, 2005. "Aggregate vs. disaggregate data analysis-a paradox in the estimation of a money demand function of Japan under the low interest rate policy," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 20(5), pages 579-601.
  5. Francesco Daveri & Cecilia Jona-Lasinio, 2005. "Italy’s Decline: Getting the Facts Right," Working Papers 301, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  6. Stefano Fachin, 2005. "Long-Run Trends in Internal Migrations in Italy: a Study in Panel Cointegration with Dependent Units," Econometrics 0507002, EconWPA.
  7. Robert E. Hall, 1986. "The Relation Between Price and Marginal Cost in U.S. Industry," NBER Working Papers 1785, National Bureau of Economic Research, Inc.
  8. Vincenzo Atella & Beniamino Quintieri, 2001. "Do R&D expenditures really matter for TFP?," Applied Economics, Taylor & Francis Journals, vol. 33(11), pages 1385-1389.
  9. James Harrigan, 1998. "Estimation of cross-country differences in industry production functions," Staff Reports 36, Federal Reserve Bank of New York.
  10. R. Paci & R. Pala & E. Marrocu, 2000. "Estimation of total factor productivity for regions and sectors in Italy. A panel cointegration approach," Working Paper CRENoS 200016, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
  11. Russell Davidson & James G. MacKinnon, 2000. "Improving the Reliability of Bootstrap Tests," Working Papers 995, Queen's University, Department of Economics.
  12. Edward J. Balistreri & Christine A. McDaniel & Eina Vivian Wong, 2003. "An Estimation of U.S. Industry-Level Capital-Labor Substitution," Computational Economics 0303001, EconWPA.
  13. Simon Broadbent, 1997. "Trade with China: Do the Figures Add up?," NIESR Discussion Papers 118, National Institute of Economic and Social Research.
  14. Balistreri, Edward J. & McDaniel, Christine A. & Wong, Eina Vivian, 2003. "An estimation of US industry-level capital-labor substitution elasticities: support for Cobb-Douglas," The North American Journal of Economics and Finance, Elsevier, vol. 14(3), pages 343-356, December.
  15. Kevin J. Stiroh, 2001. "Information technology and the U.S. productivity revival: what do the industry data say?," Staff Reports 115, Federal Reserve Bank of New York.
  16. repec:tpr:qjecon:v:110:y:1995:i:4:p:1127-70 is not listed on IDEAS
  17. Filippo Altissimo & Domenico J. Marchetti & Gian Paolo Oneto, 2000. "The Italian Business Cycle; Coincident and Leading Indicators and Some Stylized Facts," Temi di discussione (Economic working papers) 377, Bank of Italy, Economic Research and International Relations Area.
  18. Christian Gengenbach & Franz C. Palm & Jean-Pierre Urbain, 2006. "Cointegration Testing in Panels with Common Factors," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 68(s1), pages 683-719, December.
  19. Altissimo, F. & Marchetti, D.J. & Oneto, G.P., 2000. "The Italian Business Cycle: Coincident and Leading Indicators and Some Stylized Facts," Papers 377, Banca Italia - Servizio di Studi.
  20. Kee Hiau Looi, 2004. "Estimating Productivity When Primal and Dual TFP Accounting Fail: An Illustration Using Singapore's Industries," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 4(1), pages 1-40, October.
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