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 productivi- ty 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 pro- ductivity 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.