From the mid-1990s to 2008, productivity in Italy stagnated, while growth in the euro area lagged behind the US. Following a period of partial convergence, productivity in the US surged again after the pandemic, outpacing both the euro area and Italy. This paper explores the potential reasons behind these recent trends.
The divergence observed in the past years is driven by cyclical, sectoral, and structural factors: the energy crisis hit the euro area harder; the ICT sector boosted growth more in the US than in Europe, and both total factor productivity (TFP) and capital intensity increased more in the US. In Italy, the main drag on productivity dynamics remains declining capital intensity, while TFP was less affected by the pandemic crisis compared with the euro area.
