A longitudinal analysis of Italian manufacturing companies’ labor productivity in the period 2004–2013

In Italy, productivity had a turning point in the second half of the 1990s, when it went into decline. During the last few years, productivity in Italy has been sluggish, with an even more marked decreasing trend. Studies on companies’ performances, regarding productivity growth, have highlighted different aspects and various concomitant factors. Many analyses focused on the lack of investment and productivity differentials related to export activity. Indeed, productivity growth is a multidimensional problem that can be approached by following the evolution of various factors, such as profitability, labor costs, growth of aggregate demand, and investment. This work aims at identifying and analyzing, at the microlevel, the determinants of labor productivity over the whole period 2004–2013, and in the two sub-periods before and after the 2007 crisis. The goal is to determine the factors that have most influenced the change in the productivity of manufacturing companies in the period considered. Moreover, we focus on those elements that permit firms to survive a crisis, and on the presence of other factors that can, instead, accelerate a crisis. To carry out this analysis, firms have to be tracked over time, so a panel of companies’ financial reports was used to create a transition matrix, and econometric models are proposed to estimate productivity determinants. We highlight the centrality of the labor market in explaining the main economic evolution, also in recent years, and the factors that have pushed Italy’s move towards a labor-intensive development model.