The productivity of Italian firms: a spatial analysis

This paper focuses on the total factor productivity (TFP) of Italian manufacturing firms over 2008-2020 and analyses the role played by different factors in determining it. Starting from the consideration that TFP in Italy presents a strong territorial component, we employ a hierarchical (multi-level) model to evaluate to what extent firms’ productivity performance is influenced by location. In this context, the analysis allows to disentangle individual, firm-level, features from higher-level, provincial (NUTS-3), ones. At the firm-level, we single out the firm’s age, size and the technology content of production; at the higher level, we consider a number of indicators relative to the quality of local infrastructure, services, administration and the level of social capital. The results show that territorial elements matter, especially for firms located in the South. We also detect a nonlinear relation between the technology content of production and productivity: moving away from “low-technology” sectors, TFP becomes higher for “middle-low technology” sectors, but gets lower as technology improves.