Does Public Sector Inefficiency Constrain Firm Productivity: Evidence from Italian Provinces

By Raffaela Giordano, Sergi Lanau, Pietro Tommasino, Petia Topalova

July 21, 2015

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Raffaela Giordano, Sergi Lanau, Pietro Tommasino, and Petia Topalova. Does Public Sector Inefficiency Constrain Firm Productivity: Evidence from Italian Provinces, (USA: International Monetary Fund, 2015) accessed December 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper studies the effect of public sector efficiency on firm productivity using data from more than 400,000 firms across Italy’s provinces. Exploiting the large heterogeneity in the efficiency of the public sector across Italian provinces and the intrinsic variation in the dependence of industries on the government, we find that public sector inefficiency significantly reduces the labor productivity of private sector firms. The results suggest that raising public sector efficiency could yield large economic benefits: if the efficiency in all provinces reached the frontier, output per employee for the average firm would increase by 9 percent.

Subject: Economic sectors, Expenditure, Labor, Labor productivity, Production, Productivity, Public employment, Public expenditure review, Public sector

Keywords: Class size dummy, Equivalent firm, Firm, Firm data, Firm level, Firm productivity, Firm Type, Industry X firm size, Labor productivity, Productivity, Public employment, Public expenditure review, Public sector, Public sector efficiency, WP

Publication Details

Pages:

26
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2015/168
Stock No:

WPIEA2015168
ISBN:

9781513580630
ISSN:

1018-5941

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