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The decline in Italian productivity: a study in estimation of long-Run trends in Total Factor Productivity with panel cointegration methods

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  • Fachin, Stefano
  • Gavosto, Andrea

Abstract

The aim of this paper is (i) to propose a method for obtaining estimates of long-run total factor productivity (TFP) trends free from the restrictive assumptions needed by traditional growth accounting, requiring only data on inputs and output flows, and able to deliver estimates of long-run TFP trends; (ii) to apply it to the Italian manufacturing industries over the period 1980-2001, so to shed some light on the severe productivity slowdown of the last decade. The approach proposed relies on recent developments in the analysis of non-stationary, cross-correlated panels. The empirical application, consistently with growth accounting, supports the view that the decline in Italian labour productivity has been mostly due to a widespread fall in TFP growth. A simple regression points as main causes to the completion of a factor reallocation process among industries and inadequate R&D investment.

Suggested Citation

  • Fachin, Stefano & Gavosto, Andrea, 2007. "The decline in Italian productivity: a study in estimation of long-Run trends in Total Factor Productivity with panel cointegration methods," MPRA Paper 3112, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:3112
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    References listed on IDEAS

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    2. Duffy, John & Papageorgiou, Chris, 2000. "A Cross-Country Empirical Investigation of the Aggregate Production Function Specification," Journal of Economic Growth, Springer, vol. 5(1), pages 87-120, March.
    3. Kee Hiau Looi, 2004. "Estimating Productivity When Primal and Dual TFP Accounting Fail: An Illustration Using Singapore's Industries," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 4(1), pages 1-40, October.
    4. Im, Kyung So & Pesaran, M. Hashem & Shin, Yongcheol, 2003. "Testing for unit roots in heterogeneous panels," Journal of Econometrics, Elsevier, vol. 115(1), pages 53-74, July.
    5. Edward J. Balistreri & Christine A. McDaniel & Eina Vivian Wong, 2003. "An Estimation of U.S. Industry-Level Capital-Labor Substitution," Computational Economics 0303001, University Library of Munich, Germany.
    6. Mary O'Mahony & Dr Michela Vecchi, 2003. "Is there an ICT impact on TFP? A heterogeneous dynamic panel approach," National Institute of Economic and Social Research (NIESR) Discussion Papers 219, National Institute of Economic and Social Research.
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    9. Francesco Daveri & Cecilia Jona-Lasinio, 2005. "Italy's Decline: Getting the Facts Right," Giornale degli Economisti, GDE (Giornale degli Economisti e Annali di Economia), Bocconi University, vol. 64(4), pages 365-410, December.
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    Cited by:

    1. Alessandro Sterlacchini & Francesco Venturini, 2013. "Boosting Manufacturing Productivity Through R&D: International Comparisons with Special Focus on Italy," Journal of Industry, Competition and Trade, Springer, vol. 13(2), pages 187-208, June.

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    More about this item

    Keywords

    Labour Productvity; Productivity Slowdown; Italy; Panel Cointegration;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity

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