An Analysis of Growth Trend in Italy

Abstract

The growth trend of Western economies has declined slowly but steadily over the last fifteen years. Shorter and less intense recoveries have at times triggered hopes for a new trend that, in fact, has never occurred. Within this framework of generalized slowdown, Italy displays an even weaker growth with respect to the most advanced European countries and the US. The paper attempts to shed light on the determinants of the Italian weakness, and to illustrate a set of policies able to favor long term growth. We develop the analysis on two separate layers. We first document the negative Italian record in terms of International competitiveness, explained by a sharp reduction in the growth rate of labor productivity as well as of total factor productivity. In the face of these difficulties, data show the relative resilience of the Italian industrial system, although with low growth rates. Such resilience is partially motivated by the moderate growth of real wages, as it emerges from a set of original elaborations, using OECD data and the KLEMS archive. Secondly, we point out the strengths of the Italian manufacturing system, and we propose a number of measures aimed at supporting economic recovery and competitiveness, focusing in particular on high tech activities in global supply chains, whose benefits would spill over to the manufacturing sector as well.