Abstract

This paper uses microdata in order to investigate the productivity slowdown observed in Italy since the early 1990s. The key question is aimed at understanding whether this productivity slowdown, which occurred in the Italian economy, can be ascribed to the dynamics in specific sectors. After having derived a very strong correlation between labour productivity and total factor productivity (TFP), the paper yields another two important results. The first of these regards the differences in TFP across sectors and the dependence of aggregate TFP on the estimates obtained for a restricted number of sectors. In particular, the productivity slow-down of the Italian economy up to 2002-2003 was due to what happened in the paper and in the chemical sectors. The second result refers to the dynamics of firms' market share. When TFP slowed down (1996-2003), this impact was very large, whereas it was negligible when the economy started to grow again. This phase of growth was characterised by a generalised increase of TFP in each and every firm.