Trends in the Italian Dualism: labour productivity dynamics and structural change

This paper analyzes the dynamics of labour productivity in the Italian provinces from 1991 to 2010. I find evidence of decreasing dispersion of aggregate labour productivity and of the emergence of a pattern of polarization. In particular, provinces with very low and very high productivity converged towards the Italian mean, clustering in two groups with higher and lower relative productivity. This trend did not change the territorial dimension of the Italian Dualism, since less productive provinces are always located in the South. Rather, distribution dynamics strengthened within homogeneity, both in the South and in the Center North. The analysis of sectoral productivity reveals that provinces in the higher cluster are on average more productive in every sector but non-market services. However, differences in sectoral relative productivity are not enough to explain the aggregate pattern of polarization. Indeed, structural composition of output shows that laggard provinces tend to be more specialised in activities whose productivity is naturally low. Furthermore, productivity growth in the low cluster was not able to reduce the gap with the initially more productive (Northern) provinces. Finally, the overall Italian performance in the 2000s has been unsatisfactory, signalling economic stagnation and decline common to both the clusters.