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The IT Revolution and Southern Europe's Two Lost Decades

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  • Fabiano Schivardi
  • Tom Schmitz
Abstract
Since the middle of the 1990s, productivity growth in Southern Europe has been substantially lower than in other developed countries. In this paper, we argue that this divergence was partly caused by ifficient management practices, which limited Southern Europe's gains from the IT Revolution. To quantify this effect, we build a multi-country general equilibrium model with heterogeneous firms and workers. In our model, the IT Revolution generates divergence for three reasons. First, inefficient management limits Southern firms' productivity gains from IT adoption. Second, IT increases the aggregate importance of management, making its inefficiencies more salient. Third, IT-driven wage increases in other countries stimulate Southern high-skill emigration. We calibrate our model using firm-level evidence, and show that it can account for 28% of Italy's, 39% of Spain's and 67% of Portugal's productivity divergence with respect to Germany between 1995 to 2008. Keywords: TFP, Southern Europe, Divergence, IT Technology adoption, Management. JEL Codes: L23, O33

Suggested Citation

  • Fabiano Schivardi & Tom Schmitz, 2018. "The IT Revolution and Southern Europe's Two Lost Decades," Working Papers 624, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
    • Handle: RePEc:igi:igierp:624
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    More about this item

    Keywords

    tfp; southern europe; divergence; it technology adoption; management. jel codes: l23; o33;
    All these keywords.

    JEL classification:

    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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