The Italian Productivity Decline: Evidence from Regional Data

In this paper the evolution of labour productivity and TFP is analysed for the Italian regions at the sector level over the period 1980-2004 using growth accounting techniques. The results suggest that the decline in productivity after 1995 has been widespread across sectors and regions, although in southern Italy the decline has been weaker; in turn, TFP growth seems to have been the major responsible for both the decline of labour productivity growth and for explaining regional labour productivity growth differentials. The estimation of a TFP growth model inspired to the Neo-Schumpeterian Growth Theory suggests that a key role in driving the different pattern in TFP growth between northern and southern regions may have been played by catching up processes, as regions that were far away from the technological frontier, mainly located in the south, have displayed faster TFP growth. The econometric results also suggest that spillover effects, R&D and, to a lesser extent, human capital may have been important drivers of the rate of innovation over the sample period.