Italy's Decline: Getting the Facts Right

The Italian economy is often said to be on a declining path. In this paper, we document that:
(i) Italy�s current decline is a labor productivity problem (ii) the labor productivity slowdown
stems from declining productivity growth in all industries but utilities (with manufacturing
contributing for about one half of the reduction) and diminished inter-industry reallocation of
workers from agriculture to market services; (iii) the labor productivity slowdown has been
mostly driven by declining TFP, with roughly unchanged capital deepening. The only mild
decline of capital deepening is due to the rise in the value added share of capital that
counteracted declining capital accumulation.