Tuesday, December 3, 2013

Dining out on the Renaissance

Only works for so long, Fadi Hassan and Gianmarco I.P. Ottaviano (Productivity in Italy: The great unlearningmight have said is the lesson for Italy. Eventually you have get with the 21st century;
There is a general consensus that ICT [Information/Communication Technology] intensity is one of the main drivers of the productivity acceleration that the US experienced with respect to Europe since the mid-nineties (e.g. van Ark, O’Mahony, and Timmer 2008). Thus, an alternative reason why Italian productivity growth reached a standstill in the same years could be limited ICT penetration. Figure 5 reports the share of ICT investment on total investment for Italy, France, and Germany for the available years. It clearly shows that since the mid-nineties Italy has no longer kept the pace of the other countries.
Not so much the volume of investment, but its misallocation;
...in Italy, the TFP index in manufacturing is 5.77% lower than if productive resources were randomly allocated across firms. In other words, by taking capital and labour away from firms and then throwing them back to firms at random, Italian manufacturing productivity would increase by almost a hefty 6%. 
Hassan and Ottaviano say that labor rigidity in Italy is actually lower than in many other European countries, including Germany, but Management, è un disastro;

  • Italian firms promote workers primarily on tenure, rather than actively identifying and promoting top performers;
  • Managers tend to reward people equally, irrespective of performance level, rather than providing targets with performance-related accountability and rewards;
  • Poor performers are more rarely removed from their positions; and
  • Senior managers, rather than being evaluated on the strength of talent pool they actively build, are more likely to not see attracting and developing talents as a priority.
  •  La dolce vita.

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