University of California, Los Angeles
Anderson School of Management
110 Westwood Plaza
Los Angeles, CA 90095
NBER Working Papers and Publications
|October 2017||Diagnosing the Italian Disease|
with Luigi Zingales: w23964
We investigate why Italy’s labor productivity stopped growing in the mid-1990s. We find no evidence that this slowdown is due to competition from China, Italy’s protective labor regulations or increasingly inefficient institutions. By contrast, the data suggest that Italy’s slowdown was more likely caused by the failure of its firms to take full advantage of the ICT revolution. While many institutional features can account for this failure, a prominent one is the lack of meritocracy in the selection and rewarding of managers. Italian firms lag in the adoption of meritocratic management, leading to lower ICT usage. We conclude that familism and cronyism are the ultimate causes of the Italian disease.