Labour-use Efficiency in the Italian Machinery Industry: a Non-parametric Stochastic Frontier Perspective

Firms’ efficiency is a mainstream in the study of economic growth. Within this broad research area, the present work, conducted as part of the research activities of SOSE S.p.A., analyses the labour use efficiency in the Italian machinery industry through the application of a non-parametric stochastic frontier model with the aim of suggesting new insights to better understand the recent dynamics of the Italian manufacturing system. An extended panel data of manufacturing Small and Medium Enterprises (SMEs) operating in the mechanical industry for the period 2002-2012 has been extracted (in anonymous form) from the Italian Ministry of Economy and Finance annual survey and used for the implementation of the proposed method. Results show the presence of a persistent level of labour-use inefficiency in the sample used for the analysis: this issue is particularly evident for the subset of firms using non standard jobs, while firms entitled to access to wage redundancy fund appear to have achieved higher levels of efficiency in labour input use on average. The analysis also shows that the inefficiency gap between the two subsets of firms tends to reduce in absolute terms over time