LONG‐RUN FACTOR ACCUMULATION AND PRODUCTIVITY TRENDS IN ITALY

Abstract

AbstractIn this article, we employ a novel historical reconstruction of labour and capital stock data since 1861 in order to reassess the proximate causes of Italy's economic development in a historical perspective. Amongst many new findings, our estimates slightly reduce the role of industry in Italy's first growth spurt at the beginning of the 20th century and amplify the severity of the Great Depression years relative to the existing literature. In general, Italy's post‐unification development was hindered by the large size of its poorly productive primary sector and by sluggish total factor productivity (TFP); expanding manufacturing and strong TFP dynamics were instead the main drivers of the country's impressive post‐World War II growth spurt. The disappointing performance of the Italian economy since 1993 is explained largely by slow labour productivity dynamics in the now dominant services sector and, more generally, by weak aggregate TFP growth and subdued capital accumulation.