The work provides evidence about the relationship between investment and total factor productivity at the firm level, and quantifies its aggregate effects thanks to a structural model, which is applied to the financial crisis of 2011-12.
A firm displaying an investment rate of at least 20 per cent in a year has a total factor productivity that is 0.8 percentage points higher than that of comparable firms that displayed their last similar investment rate the year before. The estimates obtained with the structural model suggest that about one third of the decline in aggregate productivity recorded in Italy during the years 2012-15 is attributable to a slowdown in the technological upgrade of capital goods due to a decline in investment during the financial crisis.
