Structural change and human capital in the Italian productive system

We study the role of human capital in the restructuring process of the Italian economy. Italy displays a large and persistent gap in the share of college graduates in the population (12% in 2007) with respect to the rest of Europe (24%). The introduction of the 3+2 reform has significantly increased the supply of college graduates, mostly absorbed by the private sector. Firm level evidence indicates that the growth in graduate employment is due almost entirely to a “within” firm component rather than to a shift of the productive structure from low to high human capital activities. We also find that a higher share of college graduates at the local level is positively associated with restructuring activities and with productivity growth. This indicates that increasing the educational attainments of the workforce is key to overcome the phase of stagnating productivity growth that characterizes the Italian economy since the mid nineties.