Working Paper: CEPR ID: DP877
Authors: Nicola Rossi; Gianni Toniolo
Abstract: Italy's economic performance between 1945 and 1992 is assessed in a general theoretical framework for productivity growth measurement which enables us to relax the binding assumptions of standard Solow-type neoclassical models. The paper shows that `true productivity' was of minor importance, being outweighted by economies of scale as a source of growth. Productivity gains are large in the `miracle years'; from the late 1960s onwards, productivity levels taper off and cost decreases can be entirely attributed to a combination of scale economies and short-run adjustment costs. In such a framework, we analyse Italy's post-war economic performance arguing that our results confirm the widely-held opinion that the inefficiency of the service sector, lack of competition in the sheltered sectors, powerful vested interests, outdated ideologies and corruption itself account for most of the productivity slow down that is observed after the mid-1960s.
Keywords: Italian economic growth; Postwar Italy; Productivity growth; Measures of productivity
JEL Codes: O1; O52
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| scale economies (F12) | productivity growth (O49) |
| inefficiencies in the service sector (L80) | productivity growth (O49) |
| lack of competition (D41) | productivity growth (O49) |
| inefficiencies in the service sector (L80) | overall productivity growth (O49) |
| powerful vested interests (D72) | long-term decline in productivity (O49) |
| outdated ideologies (B14) | long-term decline in productivity (O49) |
| service sector efficiency (UK) (L80) | Italy's growth potential (O52) |