Abstract
Italy’s manufacturing performance in the last decade was the worst of all the other major OECD countries. The study investigates the micro-dynamics underlying the aggregate trend. While labor productivity in most manufacturing sectors has remained almost flat, distribution support has widened. Statistical evidence suggests that the different sources of firm heterogeneity (including, among others, productivity, export and innovation) tend to correlate, thus defining different types of firms within the same sector. In fact, we can observe a tendency towards a sort of neo-dualism in which a (very) small group of dynamic firms coexists alongside another, much bigger group of laggard firms, which are less productive and innovative and far more oriented to solely the domestic market. What is particularly intriguing is the inability of competitive pressures to weed out the lowest performing firms.
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