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Productivity and reallocation: evidence from the universe of Italian firms

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  • Andrea Linarello

    (Banca d'Italia)

  • Andrea Petrella

    (Banca d'Italia)

Abstract

This paper investigates the contribution of allocative efficiency to aggregate labor productivity growth in Italy between 2005 and 2013. Exploiting a unique dataset that covers the universe of active firms, we find that allocative efficiency accounted for 35 per cent of aggregate productivity in 2005 and its weight increased by almost 7 percentage points during the period of observation. We show that the dynamics of aggregate labor productivity benefited from the reallocation of resources among continuing firms and from the net effect of business demography. Among industries, we find that reallocation has been stronger in industries that are more exposed to import competition from developing countries. Moreover, we document that the observed adjustments have not evenly affected all firms across the productivity distribution: selection has become tougher for firms belonging to the lower tail, forcing the exit of the least productive firms and favoring the reallocation of the workforce to the best performing firms.

Suggested Citation

  • Andrea Linarello & Andrea Petrella, 2016. "Productivity and reallocation: evidence from the universe of Italian firms," Questioni di Economia e Finanza (Occasional Papers) 353, Bank of Italy, Economic Research and International Relations Area.
    • Handle: RePEc:bdi:opques:qef_353_16
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    Cited by:

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    2. Fabiano Schivardi & Enrico Sette & Guido Tabellini, 2022. "Credit Misallocation During the European Financial Crisis," The Economic Journal, Royal Economic Society, vol. 132(641), pages 391-423.
    3. Guzmán González-Torres & Giacomo Rodano, 2020. "Court efficiency and aggregate productivity: the credit channel," Temi di discussione (Economic working papers) 1287, Bank of Italy, Economic Research and International Relations Area.
    4. Gnocato, Nicolò & Modena, Francesca & Tomasi, Chiara, 2020. "Labor market reforms and allocative efficiency in Italy," Labour Economics, Elsevier, vol. 67(C).
    5. Adamopoulou Effrosyni & Bobbio Emmanuele & Philippis Marta De & Giorgi Federico, 2019. "Reallocation and the Role of Firm Composition Effects on Aggregate Wage Dynamics," IZA Journal of Labor Economics, Sciendo & Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 8(1), pages 1-24, June.
    6. Rosalia Greco, 2023. "A structural analysis of productivity in Italy: a cross-industry, cross-country perspective," Questioni di Economia e Finanza (Occasional Papers) 825, Bank of Italy, Economic Research and International Relations Area.
    7. Diane Coyle & Jen‐Chung Mei, 2023. "Diagnosing the UK productivity slowdown: which sectors matter and why?," Economica, London School of Economics and Political Science, vol. 90(359), pages 813-850, July.
    8. Maria Gabriela Ladu & Andrea Linarello & Filippo Oropallo, 2020. "Trade shocks, product mix adjustment and productivity growth in Italian manufacturing," The World Economy, Wiley Blackwell, vol. 43(5), pages 1434-1451, May.
    9. Andrea Linarello & Andrea Petrella & Enrico Sette, 2019. "Allocative Efficiency and Finance," Questioni di Economia e Finanza (Occasional Papers) 487, Bank of Italy, Economic Research and International Relations Area.
    10. Roberta De Santis & Valeria Ferroni, 2019. "On Productivity Measurement and Interpretation: Some Insights on Italy in the European Context," LEQS – LSE 'Europe in Question' Discussion Paper Series 142, European Institute, LSE.
    11. Matteo Bugamelli & Andrea Linarello & Roberta Serafini, 2019. "The 'Margin call'. Export experience and firm entry into new export markets," Questioni di Economia e Finanza (Occasional Papers) 536, Bank of Italy, Economic Research and International Relations Area.
    12. 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, CESifo, Sciences Po;CES;MSH, vol. 33(96), pages 635-684.
    13. Matteo Bugamelli & Francesca Lotti & Monica Amici & Emanuela Ciapanna & Fabrizio Colonna & Francesco D�Amuri & Silvia Giacomelli & Andrea Linarello & Francesco Manaresi & Giuliana Palumbo & Filippo , 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.
    14. Effrosyni Adamopoulou & Emmanuele Bobbio & Marta De Philippis & Federico Giorgi, 2016. "Allocative efficiency and aggregate wage dynamics in Italy," Questioni di Economia e Finanza (Occasional Papers) 340, Bank of Italy, Economic Research and International Relations Area.
    15. Giordano, Claire & Marinucci, Marco & Silvestrini, Andrea, 2019. "The macro determinants of firms' and households' investment: Evidence from Italy," Economic Modelling, Elsevier, vol. 78(C), pages 118-133.
    16. Evguenia Bessonova & Anna Tsvetkova, 2022. "Do Productivity Laggards Ever Catch Up With Leaders?," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 68(S1), pages 71-107, April.
    17. Armando Rungi & Francesco Biancalani, 2019. "Heterogeneous Firms and the North–South Divide in Italy," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 5(3), pages 325-347, October.
    18. Marco Bee & Julien Hambuckers, 2020. "Modeling multivariate operational losses via copula-based distributions with g-and-h marginals," DEM Working Papers 2020/3, Department of Economics and Management.
    19. Bańbura, Marta & Albani, Maria & Ambrocio, Gene & Bursian, Dirk & Buss, Ginters & de Winter, Jasper & Gavura, Miroslav & Giordano, Claire & Júlio, Paulo & Le Roux, Julien & Lozej, Matija & Malthe-Thag, 2018. "Business investment in EU countries," Occasional Paper Series 215, European Central Bank.
    20. 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).

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    Keywords

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    JEL classification:

    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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