Italian manufacturing and service firms labor Productivity: a longitudinal quantile regression analysis

Labor productivity is an heterogeneous concept and very complex to analyze across time, sectors and countries. In Italy, in particular, contrary to conventional wisdom, labor productivity has shown a slowdown in recent years but sector analyses highlight the presence of specific niches that have good levels of productivity and performance. This paper investigates how firms’ characteristics might have affected the dynamics of the Italian service and manufacturing firms' labor productivity in recent years (1998-2007), comparing them and focusing on some sectors. We use a micro level original panel from the Italian National Institute of Statistics (ISTAT) and a longitudinal quantile regression approach that allow us to show that labor productivity is highly heterogeneous and that the links between labor productivity and firms’ characteristics are not constant across quantiles. We show that average estimates obtained via GLS do not capture the complex dynamics and heterogeneity of the service and manufacturing firms’ labor productivity. Using this approach, we show that innovativeness and human capital, in particular, have a larger impact on fostering labor productivity of lower productive firms. From the sector analysis on four service’ sectors (restaurants & hotels, trade distributors, trade shops and legal & accountants) we show that heterogeneity is even more intense at a sector level and we derive the common features that link all sectors that may be useful in terms of policy implications.