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 try to explain why Italy’s labor productivity stopped growing in the mid-1990s. We find no evidence that this slowdown is due to trade dynamics, Italy’s inefficient governmental apparatus, or excessively protective labor regulations. 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. Familyism and cronyism are the ultimate causes of the Italian disease.