Structural Change and Human Capital in Italy’s Productive Economy

Abstract

We study the role of human capital in the restructuring of the Italian economy. The share of university graduates in the population has long been far lower in Italy (12 percent in 2007) that in the rest of Europe (24 percent). The 32 reform of Italian degree programmes has significantly increased the supply of graduates, mostly absorbed by the private sector. Firm-level evidence shows 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 university graduates at local level is positively associated with restructuring activities and with productivity growth. This suggests that increasing the workforce’s level of educational attainment is crucial to overcome the stagnation in productivity that has characterized the Italian economy since the mid-nineties.