A Sectoral Analysis of Italy's Development, 1861-2011

Abstract

Italy's economic growth over its 150 years of unified history did not occur at a steady pace nor was it balanced across sectors. Relying on an entirely new input (labour and capital) database by us built and presented in the Appendix, together with new Banca d'Italia estimates of GDP by sector, this paper evaluates the different labour productivity growth trends within the Italian economy's sectors, as well as the contribution of structural change to productivity growth. Italy's performance is then set in an international context: a comparison of sectoral labour productivity growth rates and levels within a selected sample of countries (UK, US, Germany, Japan, India) allows us to better time, quantify and gauge the causes of Italy's catching-up process and subsequent more recent slowdown. Finally, the paper analyses the proximate sources of Italy's growth, relative to the other countries, in a standard growth accounting framework, in an attempt also to disentangle the contribution of both total factor productivity growth and capital deepening to the country's labour productivity dynamics.JEL classifications: N10, N30, O47, O57

Growth and Cycles of the Italian Economy Since 1861: The New Evidence

“…For the supply side, value added series at factor cost for three high levels of sectoral aggregation (agriculture, industry and services) are used; 8 for the demand side, the main time series are consumption (public and private), investments (including inventories variation) and the difference between external uses (exports of goods and services) and external sources (imports of goods and services). Some other time series analysed in the present paper, especially concerning the labour market and including employment and wage data, are instead derived from Broadberry et al (2011) and Giordano and Zollino (2012). 9 All series are expressed as chained 2005 euros on the basis of the current boundaries for the whole 1861-2011 period.…”

“…161-162) for a more detailed illustration of the differences between the 1861-1970 and 1861-2011 blocks of estimates. 9 The data used by Broadberry et al (2011) are publicly available at http://www.bancaditalia.it/statistiche/ storiche/LABCAP150-1.0.xls, while the original data from the study of Giordano and Zollino (2012) were kindly provided by the authors. 10 GDP implicit price deflator data can be found in the worksheet "Tab_03" of the accompanying Excel file (http://www.bancaditalia.it/statistiche/storiche/Data_Na150-1.1.xls) made available by Baffigi (2013).…”

“…Although this statistical evidence is not of course sufficient reason to revive the older debate on the "take-off" of the historical literature, the new GDP series, by sharply reducing the turn-off century increase in the economy's growth rate, especially in per capita terms, casts severe doubts on the older view that Italy's economy "took off" in the early twentieth century. Average percentage changes over sub-periods-for value added, employment and labour productivity the third and fourth sub-periods refer, respectively, to 1951-1970 and 1971-2001 Source Authors' own calculations using Baffigi (2013) and Giordano and Zollino (2012) estimates a Value added growth is computed by using the two different blocks of estimates 1861-1970and 1861-2011-see text and (Baffigi, 2013 b The level of labour productivity, of which the average annual growth rates have been computed, is calculated as the ratio of per capita value added to full-time equivalent employment by major sectors and for the aggregate economy…”

The Golden Age and the Second Globalization in Italy

“…However, normalizing for initial income, Italy outperformed its European peer group and growth was about 0.65 percentage points per year faster than might have been expected (Crafts and Toniolo 2008). Labour productivity growth averaged 6.8 per cent per year in industry and 5.7 per cent per year in agriculture during these years (Broadberry et al 2010). The weight of agriculture in the economy fell rapidly; the sector accounted for 44 per cent of employment in 1951 but only 18 per cent in 1973.…”

“…Italy enjoyed a remarkably rapid rate of total factor productivity (TFP) growth at this time; from 1945 to 1973 the average was 5.8 per cent per year (Broadberry et al 2010). As catchup proceeded from a starting point of "backwardness", in part, TFP growth came from reductions in inefficiency, especially resulting from the movement of labour out of agriculture, as Table 6 reports, and from the realization of substantial economies of scale (Rossi and Toniolo 1996).…”