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

Author/Editor:

Raffaela Giordano ; Sergi Lanau ; Pietro Tommasino ; Petia Topalova

Publication Date:

July 21, 2015

Electronic Access:

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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.

Series:

Working Paper No. 15/168

Subject:

English

Publication Date:

July 21, 2015

ISBN/ISSN:

9781513580630/1018-5941

Stock No:

WPIEA2015168

Format:

Paper

Pages:

26

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