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Does Public Sector Inefficiency Constrain Firm Productivity: Evidence from Italian Provinces
Author:
Raffaela Giordano null

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Mr. Sergi Lanau
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Pietro Tommasino null

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Petia Topalova null

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Series:
IMF Working Papers
Volume/Issue:
Volume 2015: Issue 168
Language:
English
Publication Date:
21 Jul 2015
DOI:
https://doi.org/10.5089/9781513580630.001
ISBN:
9781513580630
ISSN:
1018-5941
Pages:
26
Keywords:
WP; firm; firm productivity; firm level; firm Type; public sector efficiency; industry X firm size; class size dummy; firm data; equivalent firm; Public sector; Productivity; Public expenditure review; Labor productivity; Public employment
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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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.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund