Trends in the Italian Dualism: labour productivity dynamics and structural change

This paper analyzes the dynamics of labour productivity in the Italian provinces from 1991 to 2010. I find
evidence of decreasing dispersion of aggregate labour productivity and of the emergence of a pattern
of polarization. In particular, provinces with very low and very high productivity converged towards
the Italian mean, clustering in two groups with higher and lower relative productivity. This trend did
not change the territorial dimension of the Italian Dualism, since less productive provinces are always
located in the South. Rather, distribution dynamics strengthened within homogeneity, both in the
South and in the Center North. The analysis of sectoral productivity reveals that provinces in the
higher cluster are on average more productive in every sector but non-market services. However,
differences in sectoral relative productivity are not enough to explain the aggregate pattern of
polarization. Indeed, structural composition of output shows that laggard provinces tend to be more
specialised in activities whose productivity is naturally low. Furthermore, productivity growth in the
low cluster was not able to reduce the gap with the initially more productive (Northern) provinces.
Finally, the overall Italian performance in the 2000s has been unsatisfactory, signalling economic
stagnation and decline common to both the clusters.