The anatomy of capital accumulation in Italy and in the main euro-area countries

This paper analyses the determinants of weak capital accumulation in Italy through a comparison with Germany, France and Spain since 2000. It decomposes capital stock growth into the gross investment rate and the depreciation rate, considering both the total economy and the private sector, with a focus on productive (total fixed assets net of residential buildings) and non-construction assets. Only in Italy did the global financial crisis and the sovereign debt crisis lead to a prolonged decline in the capital stock, particularly in productive assets, lasting until 2020. Although capital accumulation recovered after the COVID-19 crisis, overall growth has remained weaker than in the other main euro-area countries. The results show that the sources of under-accumulation differ across country comparisons. Relative to Spain, Italy's gap mainly reflects higher depreciation rates; relative to Germany and France, it is chiefly explained by lower gross investment rates. These differences reflect both developments in investment intensity and changes in capital productivity. However, France's systematically higher investment rate appears to depend less on a greater propensity to invest than on a value-added-to-capital ratio that is markedly higher than in all the other countries considered. This pattern suggests a possible heterogeneity in the measurement of capital stocks across countries and raises concerns about the comparability of standard decompositions of labour productivity growth into capital deepening and total factor productivity.