Over the last two decades, total factor productivity (TFP) in Italy decreased by 0.2% per year, while increasing on average in the Euro-area countries. This decline suggests the existence of large inefficiencies in the allocation of resources, making the Italian case particularly interesting and...

This paper provides a detailed analysis of the patterns of misallocation in Italy since the early 1990s. In particular, we show that the extent of misallocation has substantially increased since 1995, and that this increase can account for a large fraction of the Italian productivity slowdown...