Why is Italian TFP decreasing? An Econometric Analysis Compares Italy with Other Three European Countries

Economic policy measures are needed to increase productivity in Italy. As the recent legislative actions do not seem to bring positive results, it is necessary to change direction. The goal of Treu and Biagi's law (respectively of 1997 and 2003) was to improve flexibility on labour market, but the main result has been greater job insecurity (Leoni, 2007). Lower labour price encouraged the exploitation of labour and discouraged investments in capital (Ciccarone & Saltari, 2010). In last years productivity gains appear to be delegated to measures such as the struggle against “slackers” in the public administration and to wage bargaining that should take into account merit and a reasonable relationship between pay and operating result (Ciccarone & Saltari, 2010). Although these last measures can not be considered wrong, more radical actions are desirable. In this part an overview of the main political advices connected to the economists' position given in the previous section is presented.
As productivity is influenced more by the dimensional effect than by production specialization in low-tech sectors, a solution to Italian problems can be the growth in firms size more than a sectoral restructuring (Foresti et al., 2007). But Italy is characterized by the presence of family firms, that not always want to increase their dimension (Bianco et al., 2009). According to Syverson (2010), when the firm is family-owned and primogeniture determined the current CEO's succession, management practice scores are lower and, for this reason, also productivity is restrained.
According to Leoni (2007), also low investments in R&D are mainly due to the small size of firms. Thus economic policy measures should be directed to increase the size of enterprises.
In order to increase productivity greater capital accumulation could be facilitated through tax incentives (Ciccarone & Saltari, 2010).
High-quality human capital can be realized by education, but Italy is lagging behind in this field: according to the European Commission (2002), the share of the population aged 25-64 with a post-secondary school degree in Italy in 2002 was 10%, while in Germany, France and Spain it was 23%.
According to Syverson (2010), intense competition in the firms' market is positively correlated with best-practice management. As higher-quality management practices are correlated with productivity (Syverson, 2010), free competition should be enhanced and antitrust laws should be enforced.
A social pact among firms, unions and government can be the starting point for a complex and modern reorganization of Italian companies (Leoni, 2007). Investment should be focused not only on organizational change, but also to more spending on ICT (Leoni, 2007).
Higher accumulation of the most innovative capital could be obtained through tax incentives to investment in ICT capital and the related changes in work reorganization (Ciccarone & Saltari, 2010).
The interventions proposed must not be unrelated to each other. Improvised measures carried out under the pressure of sectoral emergencies can not act at the root causes of the disease that afflicts the Italian economy: it is necessary that different policies are part of an organized and structured design (Ciccarone & Saltari, 2010).