Experience, Innovation and Productivity - Empirical Evidence from Italy's Slowdown

We investigate the role of workers’ and managerial experience as a determinant of firm innovation and productivity in a sample of Italian manufacturing firms. A high share of temporary – thus un-experienced - workers is associated to low innovation and productivity. The effect of managerial experience measured by age on firm performance depends instead on the type of firm: high age of managers and board members is bad for innovation and productivity growth, while costs and benefits of old managerial age cancel out for non-innovative firms.firm productivity, innovation, managerial experience, temporary jobs

Labor market rigidity, social policies and the labor share: Empirical evidence before and after the big crisis

This paper provides evidence of the impact of three important and general policies shaping the degree of labor market rigidity on the labor share: welfare expenditures, government expenditures on active labor market programs, and passive labor market measures. It analyzes the impact of regulation, such as the intensity of employment protection, and evaluates whether trade unions and minimum wage institutions play a role in the relationship between all measures and the labor share. The labor income share has experienced a declining trend since the mid-1970s in most advanced economies, and the existing literature found little if no correlation of this decline to general labor market characteristics. However, the present paper finds that some institutions are correlated to the downward trend, depending on the welfare system adopted, and that welfare and employment protection counteract the decline. Moreover, many countries saw an upsurge in their labor share after the burst of the financial crisis. Evidence of whether the effect of the policies weakened or reinforced the labor share after 2007 is reported

Labor Taxes and Wages: Evidence from Italy

We study the empirical relationship between labor taxation and pretax wages in Italy. We find that higher tax progressivity increases pretax wages. To explain this result, we introduce in an informal way a relative wage effect and argue that the combination of this effect with the labor supply effect dominates the wage moderation effect. We find also evidence that changes in payroll taxes are not fully absorbed by offsetting changes in the pretax wage and affect labor costs and employment. The evidence on the effect of the average income tax rate on pretax wages is more mixed, but it also points to the presence of some degree of real wage resistance. Finally, we find significant differences in the relationship between labor taxes and pretax wages by age group but not by skill or region of residence.progressive taxation, wage determination, Italy

Ethnic groups' income inequality within and across Italian regions

The relationship between regional income inequality in Italy and the phenomenon of migration is still under current debate. Policymakers and researchers worry about the process of assimilation of the new entrants, in a country where regional disparities are strong. We provide evidence that regional income disparities apply to ethnic groups of migrants, too, like the group of nationals, but the largest source of inequality is still within region and within group. We address this issue by using the 2009 wave of EUSILC data and the ISTAT CVS data in 2009, the latter offering specific information on households with foreigners/migrants by main ethnic groups. We calculate several indexes of income inequality because of their specific sensitivity to different portions of the Italian income distribution. We also estimate the main determinants of such inequality. Our results suggest that, above all, women with very young children and individuals with secondary education belong to categories with significantly increased income inequality, whereas those highly educated and leaving in the Centre-North of Italy belong to categories with reduced inequality. Regional unemployment is associated to lower inequality, especially among those low-income earners, while higher relative mean regional income pushes inequality upwards

The effect of economic crisis on regional income inequality in Italy

This paper analyzes the determinants of unequal income distribution across macro-regions in Italy, and whether the latest economic crisis has had an effect on income inequality within or between regions. Inequality between individuals and between families appears greatest in the south, and the crisis has exacerbated this phenomenon. Econometric analyses by population groups and by nationality suggest that high educational attainment levels and larger households contribute to increasing the household income, whereas being female and foreign tend to reduce household income. The income distribution of foreign-born individuals tends to be more asymmetric, with heavier tails, compared to that of nationals

Labor Market Rigidity, Social Policy and the Labor Share. Empirical evidence before and after the big crisis.

We estimate the impact of four important and general policies shaping the degree of labor market rigidity on the labor share: the intensity of employment protection, welfare expenditures, government expenditures on active labor market programs, and minimum wage policy. Moreover, we are interested in whether the size of trade unions affects the labor share. Labor income share has experienced a declining trend since mid-1970s, and the empirical evidence found little if no correlation of this decline to general labor market institutions. We found, however, that some institutions are correlated to the downward trend, depending on the welfare system adopted. Moreover, many countries saw an upsurge of their labor share after the burst of the financial crisis. We also discuss evidence of whether the crisis weakened or reinforced the effect of some policies in sustaining the labor share

Are ICT, Human Capital and Organizational Capital Complementary in Production? Evidence from Italian Panel Data

Information and communication technologies (ICT) are considered to play a central role in determining productivity. The discussion on the impact of ICT on growth and productivity was stimulated by the famous sentence of Robert Solow (1987): “You can see the computer age everywhere but in the productivity statistics” (the so called Solow paradox or productivity paradox). This quote was actually expressing concern that, while investment in ICT during the eighties and early 90s was growing exponentially in the U.S. and quality-indexed prices for computer were rapidly (and exponentially) falling, productivity in the Service industry, in which about 80% of IT investment is made, was actually stagnating. Trying to provide a solution to the productivity paradox, some scholars (mainly Brynjolfsson and co-authors) have argued that ICT capital does not -per se- increase productivity. In fact, productivity increases when investments in a set of complementary assets are made. These assets are ICT capital, Organizational Capital and Human Capital. In this paper we explore the ICT-Organizational Innovation-Human Capital complementarities issue for the Manufacturing sector in Italy. We use data from the 7th, 8th and 9th waves of the “Indagine sulle Imprese Manifatturiere Italiane” by Unicredit (previously managed by Capitalia-Mediocredito Centrale), which contains information on ICT investments, organizational innovations, the skill composition of the work-force and on many other variables (measured at the firm level). From these three waves we create an unbalanced panel, made up by firms observed either in waves 7 and 8, in waves 8 and 9 or in waves 7, 8 and 9. After generating values for real product and real capital, we take the wave-to-wave variation in the log of productivity and regress it on a series of explanatory variables, including ICT investment, the presence of organizational innovations, the skill composition of the work force and their interactions. By taking first differences (wave-to wave differences) we are able to control for unobserved fixed effects which might be related to the endogenous variable (labor productivity) and to some explanatory variables. On these differenced data we run OLS and find no evidence of the complementary hypothesis between ICT investment and organizational innovations, which is per se an interesting results because for many other (European) countries there exists significant evidence of complementarity. This is perhaps due to 1) the focus on manufacturing firms and 2) the fact that most firms in our dataset are medium-small firms (i.e. organizational change is more complementary with ICT investment for large firms). Our data also signal that the skill composition of the work-force is a strong determinant of productivity (either alone and when interacted with other potentially complementary assets). Finally, ICT investment is a complement to human capital, given that more ICT positively interacts with a high fraction of educated workers to stimulate productivity growth.JRC.J.3-Information Societ

Profit Shifting by Debt Financing in Europe

This article aims at analyzing the link between subsidiaries’ capital structure and taxation in Europe. First we introduce a trade-off model, which studies a MNCs’ financial strategy and shows how debt policy allows multinational groups to shift profits from low-tax to high-tax jurisdictions. By letting the MNC choose both leverage and the percentage of profit shifting, we depart from the relevant literature which has mainly focused on the latter. Using the AMADEUS dataset we show that: i) subsidiaries’ leverage increases with the statutory tax rate, levied in the country where it operates; ii) this positive effect is lower, the higher the parent company tax rate is. Furthermore, an increase in the parent company’s tax rate is estimated to raise its subsidiaries’ leverage.capital structure, default, multinationals, profit shifting, taxation

Service deregulation, competition and the performance of French and Italian firms

We use firm-level data for France and Italy to explore the impact of service regulation reform implemented in the two countries on the mark-up and eventually on the performance of firms between the second half of the 1990s and 2007. We find that the relation between entry barriers and productivity is negative and is crucially intermediated through the firm’s mark up. If both countries adopted OECD’s best practices in terms of entry barriers, their TFP level would increase by 3% for Italy and 3.5% for France

Labour productivity of young and adult temporary workers and youth unemployment: a cross-country analysis

The latest crisis has exacerbated two negative macroeconomic phenomena, particularly in Southern Europe. The size and persistence of youth unemployment has become unacceptable after 2010. Stagnation in labour productivity instead goes back to the ‘90s, but it has not improved since then and even worsen with the crisis. In this paper we analysed these two macroeconomic features, using aggregate data, in relation to labour market characteristics. Reforms of regulation, in many countries over the past twenty years, introduced a set of newly designed job contracts that allowed the use of temporary work. At the same time, Employment Protection Regulation encompassed temporary workers too. The availability of new contracts and EPLT changed the incentives of firms to vary their labour needs, and to invest in new technology. Eventually, this should have an impact on labour productivity and unemployment. We distinguished between temporary young and adult workers and, conditional to the level of employment protection, we estimate their labour productivity and the correlation with the rate of youth unemployment. We use macroeconomic data for countries within groups (former Euro zone countries, Euro-zone plus Russia, OECD, G7, G8). Preliminary evidence shows that the share of adult temporary workers clearly and negatively affects labour productivity, no matter the group of countries