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INTRODUCTION Labour,
productivity
Labour, productivity and growth: and growth
an introductory essay
701
Enrico Marelli
Department of Economics, University of Brescia, Brescia, Italy, and
Francesco Pastore
Seconda Università di Napoli, Naples, Italy and IZA, Bonn, Germany

Abstract
Purpose – The purpose of this paper is to introduce the special issue on “Labour, productivity and
growth”.
Design/methodology/approach – The paper discusses the articles in the special issue, which
investigate the main theme – labour, productivity and growth – from different points of view by
employing a variety of econometric methods. These include improvement of the evaluation of the
impact of labour market flexibility on economic performance, analysis of the macroeconomic law of
decreasing returns to labour, a new panel co-integration method, and a reinterpretation of
co-integration analysis to assess the impact of incomes policy. Institutional variables, in particular the
system of industrial relations, are duly considered.
Findings – The papers in the special issue highlight different causes of sluggish economic
(productivity) growth in Europe, in the light of not only traditional macroeconomic variables, such as
total factor productivity and labour market flexibility, but also such factors as neo-corporatist
industrial relations and management practices, which are generally neglected in the literature.
Originality/value – The paper introduces a number of articles proposing innovations in the
interpretation and application of a wide range of theoretical approaches and econometric
methodologies. It also discusses several policy suggestions for fighting sluggish productivity
growth, including investment in research and development, human capital, flexicurity, innovative
industrial relations practices and high-performance workplace practices also considered capable of
affecting macroeconomic performance.
Keywords Labour, Productivity rate, Flexible labour, Industrial relations, Management techniques
Paper type Viewpoint

This special issue includes six contributions on the topic “Labour, productivity and
growth”. This was the title of the main thematic session of the Conference of the Italian
Labour Economic Association (AIEL) held in Brescia in 2008, from which almost all the
assembled papers have been selected. Notwithstanding the peculiarities of each
research paper, particularly in terms of the specific field of investigation, they exhibit
robust similarities as for the general theme, the methods of analysis (all papers are

The authors are grateful to the Editor, Adrian Ziderman, for offering them the opportunity to act
as Guest Editors of this special issue. The contributions in this volume were selected from the
International Journal of Manpower
papers presented at the XXIII Conference of the Italian Association of Labour Economists (AIEL) Vol. 31 No. 7, 2010
held in Brescia (Faculty of Economics) in September 2008. The authors are also grateful to all the pp. 701-712
q Emerald Group Publishing Limited
referees whose comments and suggestions contributed to improve the quality of the papers 0143-7720
included in this issue. DOI 10.1108/01437721011081554
IJM strongly empirically oriented), the reference area and also the policy implications.
31,7 Economic growth has been sluggish in Europe, even before the recent global recession,
and in some countries “economic decline” is a worrying scenario.
As a matter of fact, the reference area of the empirical studies is represented by the
OECD countries (the first paper) and within them the European countries (the second
paper) and – more specifically – the Italian economy (in the next four papers, with a
702 comparison with the UK in the last one). Notice that Italy is a particularly interesting
“case study” since its dynamics is emblematic of a poor development path typical of
South European countries and possibly also of new EU members.
The interactions between economic growth, productivity dynamics and labour
market performance that are expounded in the six contributions are important to
understand both the causes and the consequences of the various developments, where
additional elements – such as institutional settings, labour policies and reforms,
systems of industrial relations, wage policies and bargaining models, workplace
organization, etc. – play a significant role.
After a first paper (by Destefanis and Mastromatteo) devoted to an investigation of
the various labour market performances in OECD countries and emphasising the role
of active and passive labour policies, the second paper (by Marelli and Signorelli)
introduces the issue of productivity and growth, by considering the trade-off between
employment and productivity dynamics, as well as highlighting the various “models of
growth” existing in the EU countries; moreover, it shows that not only is productivity
affected by employment rate changes, but – among the numerous determinants –
human capital emerges as a key factor. The next contribution (by Fachin and Gavosto)
focuses on Italy, whose productivity dynamics have been the poorest in Europe along
with Spain, and find robust evidence (by means of an innovative econometric method
different from growth accounting) that the decline in Italian labour productivity in the
past decade has been mostly due to a widespread fall in “total factor productivity”
(TFP) growth.
The following paper (by Tronti) focuses on the institutional determinants of the
Italian productivity slowdown, by linking productivity dynamics to the reforms in
labour and goods markets, to the specific bargaining model, and to the evolution over
time of the functional income distribution. The centralised wage bargaining system
existing in Italy since 1993, the “new corporatist” principles and the incomes policy are
also investigated in the subsequent contribution (by Pastore), which verifies that
incomes policy (based on the “1993 Protocol”) has caused a regime shift in the process
of wage determination and that the link between real wages and (very low) labour
productivity growth has weakened in recent years. The final paper (by Cristini and
Pozzoli) still deals with productivity differences but is based on firm-level data for two
countries – Italy and the UK – and estimates the effects on TFP of “standard”
innovative workplace practices: it is found that team-working, supported by training,
is dominant in the British establishments, while the Italian ones are more inclined
towards functional flexibility and information sharing.
Now we shall briefly summarise in a non-technical way the main features and key
findings of the six contributions.
Summary of the papers Labour,
The first paper, by Sergio Destefanis and Giuseppe Mastromatteo, deals with productivity
“Labour-market performance in the OECD. Some recent cross-country evidence”. In
this paper the authors assess the evolution of labour-market performance in the OECD and growth
over the last decade, asking how sensitive the policy claims made in the influential
OECD Job Study can be to the impact of cross-country heterogeneity and outliers. They
bring the framework adopted in the Job Study to the data for 30 OECD countries over a 703
relatively recent period (1994-2004). Problems of data availability compel them to deal
with changes through this period as a cross-section.
In particular, the focus of the empirical study is the relationship between policy
change indicators and labour-market performance, measured by the employment and
unemployment rates. Policy change indicators include the index of the intensity of
reform policy computed by Brandt et al. (2005) for the period 1994-1999. It also
considers the components of this index, i.e. the indicators relating to changes in the
following policy fields: taxes and social security contributions, employment protection
legislation, unemployment benefit system, active labour-market policies, retirement
and pension schemes, wage formation, part-time and working-time flexibility.
The common methodology, followed in many OECD follow-up studies, with a
simple bivariate relationship between policy change indicators and labour-market
performance, is rather unsatisfactory. Policy changes are not randomly distributed
across countries. When the labour-market performance is bad, governments may be
more willing to implement either OECD-recommended or other types of labour-market
policies. In order to control for these factors, the authors include in the estimates the
1994 (initial-year) rate of unemployment, a strategy similar to the inclusion of past
history variables in microeconometric policy evaluation analysis; the lagged rate of
unemployment is included as a catch-all proxy of past labour-market performance
because of its undeniable policy relevance.
A further point is that countries are not hit by the same vector of shocks. Changes in
industrial structure, not wholly amenable to policy decisions, could have an impact of
their own on labour-market performance. These shocks are measured through changes in
the share of construction or service workers over total employment. In order to allow for
macroeconomic shocks, the rates of change in GDP are also included in the estimates; but
the lack of appropriate data makes it impossible to allow for a richer array of shocks.
Finally, there may be in the chosen sample some outlying countries (the cases of
Ireland, Spain, and, for unemployment, Finland, Poland or the Slovak Republic, come
immediately to mind), exerting an anomalous influence on the estimation results. In
order to unveil these outliers and check their influence upon the results, the authors
rely on some appropriate robust regression techniques.
Turning now to the results, the authors highlight the role of unemployment benefits
and, especially, of active labour-market policies. Other policy indicators (including
those related to tax and wage formation reforms) have much less impact on
labour-market performance. Hence the paper reiterates, to some extent, the point made
in Baker et al. (2004), according to which much of the explanatory power of
labour-market institutions derives from the performance-enhancing effects of active
labour-market policies. It is also found that changes in labour-market performance are
significantly (and inversely) linked to lagged unemployment. Changes in the share of
construction workers are significant too, even in the presence of various kind of policy
IJM change indicators (while rates of change in GDP and changes in the share of
31,7 construction workers are basically never significant).
Summing up, this paper brings to the fore novel evidence about cross-country
labour-market performance at a time when this issue is of high interest for citizens and
policy-makers. An important policy role seems to emerge for unemployment benefit
reforms and, even more so, active labour-market policies. This evidence also supports
704 the contention that the construction sector is important for labour-market performance.
Considering the dire situation of this sector since the 2008 economic and financial crisis
(European Commission, 2009, pp. 28-9), this is a pretty worrying result.
The second contribution, by Enrico Marelli and Marcello Signorelli, is on
“Employment, productivity and models of growth in the EU”. Notwithstanding the
(overall) unsatisfactory position of EU countries, it highlights the existence within
Europe of different “models of growth” (intensive, extensive, virtuous and stagnant).
At the outset of the paper, the authors recognise that in many Western European
countries there was, from the early 1970s to the mid-1990s, a dominance of a “jobless
growth” model, with high and persistent unemployment rates. Afterwards, many
European countries have shown weaknesses in terms of GDP and productivity growth,
accompanied by an increase in employment, that followed some labour market
reforms: this happened in some “old” EU countries (especially in Italy and Spain, at
least until the 2008-2009 global crisis). This “extensive” growth model of some Western
EU countries contrasts with the prevailing “intensive” model (increasing productivity
and falling employment) followed by many “new member states”, during their
transitional processes.
A first aim of this paper is to illustrate some stylised facts of recent economic
growth and labour market performance in EU-27, with particular reference to the
employment-productivity relation. The main focus of the empirical investigations is to
econometrically test the so-called “diminishing returns of employment rate” hypothesis
(see Belorgey et al., 2006, among others), for the 2000-2006 period: the results show that
high employment growth is likely to lead to slower productivity growth. The analysis
of the “trade-off” between employment and productivity is developed after a more
general consideration, for a longer span of time (1990-2008), of the growth models.
A second aim of the paper is to investigate the possible explanations of the
differences in productivity across the EU-27 countries. Following a brief, although
wide-ranging, review of the recent literature, the main explanatory variables that result
as the most significant in the econometric estimates are the following: education, an
EBRD index (measuring the progress in transition), some structural indexes
(agriculture and industry employment shares or a synthetic index of specialisation),
a “shadow economy” index. The results also confirm the beta-convergence of
productivity per worker in the EU-27 countries (both absolute and conditional on
education), i.e. productivity is increasing faster where the initial level was lower.
The main policy implication calls to mind, at this point, the EU Lisbon strategy to
create “more and better” jobs. Many old European countries have been able to create
more jobs in the decade preceding the world recession, partly thanks to labour market
reforms. But this strategy must be completed by:
.
paying much more attention to the “better jobs” specification, not only to
increase workers’ welfare but also to foster their effort and motivation; and
.
focusing more directly on productivity growth.
A special endeavour is needed to place knowledge and education, together with R&D Labour,
and innovation capabilities, at the top of the policy agenda, as the main instruments for productivity
achieving growth and competitiveness. In the long run, in fact, a sustained
productivity growth is also beneficial in preserving and expanding employment, thus and growth
overturning the short-run trade-offs.
As for the effects of the global recession, it has already produced huge and different
real effects (GDP and employment decline) also in the EU. The impact on labour 705
markets has been delayed, but it will be lasting (International Labour Organisation,
2010). The short run aggregate effects of the recession on productivity have been
differentiated by countries, also due to various labour market legislations and labour
hoarding practices. The degree of persistence – especially of unemployment – will
crucially depend, among other things, on policy interventions. It is extremely
important that the future exit strategies and fiscal consolidations will not be too
detrimental to those public expenditures functional to economic growth and
productivity dynamics.
Then, Stefano Fachin and Andrea Gavosto provide a contribution on “Trends of
labour productivity in Italy: a study with panel co-integration methods”, thus focusing
on the Italian case (which is quite interesting, as already anticipated). The growth of
value added per worker (henceforth labour productivity) in Italy since the late 1990s
has been abysmal, the poorest in Europe along with Spain. Since labour productivity
growth is important not only in the long run, as the force shaping living standards, but
also in the short run, as one of the determinants of output and employment growth,
understanding the causes of this slowdown is a matter of great importance.
In the literature, there are essentially two competing explanations, either:
(1) a decline in capital intensity growth (possibly linked to a change in relative
factor prices); or
(2) a decline in total factor productivity (TFP) growth.

The answer is clearly highly relevant from a policy perspective: in the first case there is
no reason of concern, while in the second there might be, as in turn two further
possibilities arise. Either the TFP slowdown reflects the exhaustion of the “quality
adjustment” component, linked to reallocation across industries, labour skills, or
capital vintages and types, or it reflects a decline in pure technical progress, due, say, to
less research, development and innovation. The latter hypothesis should be of
particular concern to policy-makers, as it would result in a prolonged competitiveness
gap of the Italian industry vis-à-vis other countries, especially within the single
currency area. A number of studies have tackled the question: the common conclusion
is that most of the decline in productivity in Italy since 1995 is due to a decline in TFP.
However, this conclusion hinges entirely on the reliability of the TFP estimates. As is
well known, this is an open point. Most growth accounting estimation exercises rely on
the assumptions of constant returns to scale and perfect competition in both the
products and factors markets, hypotheses that are, respectively, not guaranteed and
very unlikely to hold (see also Stiroh, 2002).
In this contribution, the authors re-examine the recent labour productivity
slowdown in Italy using a new panel co-integration method, able to deliver TFP
estimates free from overly restrictive assumptions on technology and market structure.
Further, and differently from traditional growth accounting methods, using this
IJM approach confidence intervals can be computed. The main assumption underlying this
31,7 TFP estimation method is that technology growth is driven by a single trend common
to all units included in the panel (industries, regions or countries). The main conclusion
of the empirical analysis for the Italian economy is very simple: there is robust
evidence that the decline in Italian labour productivity in the past decade has actually
been mostly due to a widespread fall in TFP growth. Some further investigations
706 suggest that this slowdown in TFP may have been associated with factor reallocation
processes among industries and capital types, which ultimately had a negative impact
on labour productivity growth.
The next contribution, on “The Italian productivity slowdown: the role of the
bargaining model”, is by Leonello Tronti. This paper is also about Italy, but it focuses
on the institutional determinants of the productivity slowdown. As already recognised
by Fachin and Gavosto, Tronti emphasises that, for many years before the
international (financial) crisis, the Italian economy was affected by difficulties in
growing. The international comparative examination of long-term productivity
performances shows that Italy has undergone a true relative downfall, unique among
European countries.
The paper addresses the Italian productivity slowdown starting from the need for
structural realignment of the European economies, aimed at facing the challenges of new
technologies, global competition and the adoption of a common European currency. Such
realignment requires the reform of both the labour and the product markets (as already
envisaged by Blanchard and Giavazzi, 2003) in order to move the euro economies, through
an institutional shock in the regulation of both markets, from a low to a higher
“competitive equilibrium”. But the product market needs to be reformed no later and no
less than the labour market, otherwise unbalanced reforms would hamper growth.
Unfortunately, in the Italian case, the imbalance between the effectiveness of labour
market reform and the shortcomings of too weak a liberalisation of the market for goods
has pushed the economy into a situation of high mark-up rents, with wages lower and
prices higher than its competitors – i.e. in a position of non-competitive equilibrium (or
resource underemployment), with the consequence of very slow growth.
In order to explain why the labour market was reformed too early and too much (in
relative terms), causing too strong a wage moderation with respect to prices and
margins, the paper discusses in detail the reform of a central labour market institution
– the “bargaining model”. This has been enacted in Italy through the trilateral
agreement that brought about the “July 1993 Protocol”. Through the Protocol Italy
enforced a two-tier bargaining model in which the first tier (national, industry-wide
collective bargaining) had the only goal of preserving the basic wage purchasing
power. Any increase in the national, industry-wide basic wages, set every two years,
should have been coherent with the target inflation rate. Local bargaining (second tier),
either at an enterprise or at a territory level, was to regulate the growth of real wages
according to the achievements of locally bargained productivity, profitability or
production quality targets.
The operation of the Protocol is analysed through a deterministic model based on
the hypothesis of constancy over time of the share of labour in income (so-called
Bowley’s Law: see Bowley and Stamp, 1927). The stability over time of the functional
distribution of income stems from the constancy of the profit rate, and the coincidence
of the growth of the capital-labour ratio with that of labour productivity. The model
shows that, on the contrary, due to the weakness of the second bargaining tier, whose Labour,
diffusion is limited by the huge number of small and micro-enterprises that constitute productivity
the Italian economic system, the new bargaining institution is marked by a structural
bias in favour of capital, so that when productivity grows the capital share in income and growth
automatically also increases. Another feature of Protocol ’93 evidenced by the model is
that the bias in favour of capital can be redressed only through a stop or a drop in
labour productivity. 707
Data from 1993 to 2008 show how the period was actually characterised by a
remarkable wage moderation and a factor distribution bias in favour of capital, while
the following period (2001-2008) was marked by a sizeable productivity slowdown. The
paper argues that the Protocol ’93 bargaining model, by providing a sort of
“safeguarding clause” to business profits (real wage increases are paid only once
productivity gains are warranted), has depressed investment and hereby growth. The
fall of incentives for entrepreneurs to engage in labour productivity growth is
supported by the finding of a strong long-term relationship between the wage share in
income and the ratio of investments to profits. In accordance with the predictions of the
model, the productivity slowdown of 2001-2008 has allowed for the wage share to grow
again, slowly but constantly recovering almost all of its 1994 level.
The paper then analyses the formal condition for correcting the distribution bias of
the bargaining model. This could be done by allowing the first-tier wage to grow not
only with prices, but also with respect to productivity gains. The coefficient linking the
first-tier wage to productivity should be directly proportional to the first-tier share in
total wage, inversely proportional to the strength of the second-tier wage, and corrected
according to the movements of the wage earners’ share in total employment. This last
result is discussed with reference to the reform of the bargaining model launched in
Italy at the beginning of 2009.
In his contribution, Francesco Pastore proposes a method of “Assessing the impact
of Incomes policy. The Italian experience”. To begin, the paper provides a bird’s eye
view over the last 40 years of the Italian economic history looking at the
macroeconomic framework and at the new model of industrial relations emerged in the
late 1980s and early 1990s. The Saint Valentine’s Decree (1984) and the ensuing hard
fought referendum (1985), which reduced the automatisms of scala mobile, started a
process of redefinition of wage fixing in Italy, which culminated with the final abolition
of scala mobile (1992) and the approval of Protocollo d’intesa (1993). Since then,
following New Corporatist principles, a national system of centralised wage
bargaining (concertazione) and the so-called “institutional indexation” have governed
the determination of wages.
Does incomes policy generate greater coordination in the process of wage formation
as new Keynesian theories used in support of neo-corporatism promise to do? Does it
reduce the unemployment rate? The author’s contribution aims to answer such
questions, which are still neglected in the literature. To such an end, it proposes an
interpretation of econometric procedures within the realm of time series analysis that
could be implemented also in other countries.
The empirical analysis is based on annual data from 1970 to 2008. After
interrogating each variable for the presence of a unit root, the paper tests for
co-integration the so-called WPYE variable, obtained as: wages 2 prices 2
output þ employment). Testing it for the degree of integration amounts to asking
IJM whether there is a stable long run equilibrium among them with the following
31,7 coefficients: (þ 1, 2 1, 2 1, þ 1). This would imply that real wages and labour
productivity equal each other and therefore that the share of labour income over output
is stable over time. If the series WPYE contains a unit root, the underlying variables
are not in equilibrium in the long run.
The author finds that real wages and productivity are in a relation of long-run
708 equilibrium only when a dummy for the year 1993 is added to the test. The share of
wages over GDP reduces by about 11 percentage points, falling down to about 57 per
cent from 1991 to 1995. The link with productivity is close to one-to-one only before the
break. This is a dramatic loss for wage employees, with potentially important
consequences also for economic growth, considering the higher propensity to consume
of labour incomes. The Andrews and Zivot test endogenously detects 1994 as the year
when the regime change took place, pointing to the Protocol as the cause of a regime
shift in the process of wage determination able to generate not only a permanent
downward impact on prices, but also on real wages.
The ensuing analysis asks whether the regime change in the mechanism of wage
fixing was able to alter the (real) Phillips curve. The main assumption of the analysis is
that, as Tarantelli (1986), Calmfors and Driffill (1988) and Newell and Symons (1987),
among others, hypothesised, by introducing a centralised mechanism of wage fixing,
incomes policy reduces the sensitivity of real wages to productivity growth, at least in
the short run. This makes real wages fall down to their market clearing level, allowing
corporatist countries to reach the same result in terms of employment as countries
where bargaining is decentralised at the firm level.
Econometric testing endogenously detects again 1994 as the year of a regime shift in
the real Phillips curve. The feedback mechanism, as measured by the coefficient of
lagged residuals in short run estimates, is increased from 2 0.46 in the pre-reform
period to 2 0.79 in the post-reform period, suggesting that incomes policy did indeed
increase real wage flexibility. In the mean time, though, the link between real wages
and (very low) labour productivity growth has weakened in the post-reform period.
The author argues that, in a sense, incomes policy has introduced a new form of
(upward) wage rigidity. Last but not least, incomes policy has changed the correlation
with the unemployment rate from positive to not statistically significant.
In a period of increasing tax burden on wages due to the need to control public debt,
a reduction in the labour share over GDP has most likely caused a contraction of
internal demand, with possible consequences for economic growth.
The analysis calls for a careful revision of the 1993 Protocol aimed at:
.
better protecting the purchasing power of real wages, without losing control of
inflation; and
.
introducing growth generating mechanisms.

There are different ways of achieving the first of these objectives, namely:
. rendering any gap between actual and expected inflation yearly and
automatically;
. introducing some kind of tax penalty for any delay in the signature of national
contracts; and
. rendering the fiscal drag to wage employees.
More generally, it is important to find systems to foster productivity growth (second Labour,
objective). Recent contributions (Acocella and Leoni, 2010; Tronti, 2010) suggest productivity
different nuances as to the ability of the 2009 Agreement to reach these policy
objectives. and growth
Finally, the paper by Annalisa Cristini and Dario Pozzoli, about “Workplace
practices and firm performance in manufacturing: a comparative study of Italy and
Britain”, closes the monographic Special Issue with an empirical comparison – based 709
on microeconomic evidence – of two important European countries. Since the late
1980s the economic impact of so called “flexible” or “high-performance workplace
practices” has interested management scholars and economists alike. These practices,
to which the authors refer to as “innovative” or high-performance workplace practices
(HPWP), origin from various intersecting managerial approaches which developed in
the 1980s and 1990s, the most important of which are the “lean production model” and
“total quality management” (TQM). Centred on the concepts of employee involvement,
empowerment and autonomy, a consensus set of innovative practices typically
includes:
.
self managed teams;
.
job rotation;
.
formal arrangements to discuss production problems;
.
systems of rewarded suggestions;
.
information sharing; and
.
some form of performance-related pay.

Although the evidence on innovative practices has spanned various countries,

cross-country analyses have been limited (EPOC Research Group, 1997, Benders et al.
2001, European Commission, 2009); moreover, the analysis of the effects of workplace
practices on the firms’ performance is essentially conducted within country, leaving
largely unexplored the question of the extent to which cross country differences in
innovative practices relate to cross country differences in productivity. In part this is
due to scarce cross-national surveys (for example, see Benders et al., 2001, on the limits
of the EPOC Research Group) and lack of comparability across national surveys;
typically, the definition of a practice is survey-specific and crucially depends on how
the questions are phrased and ordered and on how the questionnaires are collected.
Authors’ contribution is a first step in relating productivity gaps to differences in
HPWP; we take advantage of two very similar surveys: the British WERS 2004 survy
and a survey designed on the basis of WERS addressed to the manufacturing firms of
two provinces in Northern Italy. By exploiting the fact that the two questionnaires
define workplace practices in essentially the same way, the authors are able to sketch a
picture of the diffusion of a commonly defined set of “standard” innovative workplace
practices in the Italian sample and in the sub-sample of manufacturing firms in WERS.
The findings of the paper indicate that, although the average incidence of practices
is almost the same in the two samples, the composition of the set of practices indicates
the relevance of team-working, supported by training, in the British establishments,
while the Italian ones are more inclined towards functional flexibility and information
sharing, with little training. Nonetheless, the statistical associations between practices
and the firm’s performance, measured alternatively, in terms of value added (VA), total
IJM factor productivity (TFP) or relative TFP shows some features that are robust across
31,7 countries: practices that favour functional flexibility, like job rotation, and that support
technical training are positively related to the establishment’s contemporaneous
productivity, while human relations training is negatively associated with it; in
contrast, other practices, like team-working and employer-employee meetings, show
quite different associations with productivity, depending on the sample.
710 Using the estimated TFP regression and a standard decomposition exercise, the
authors then break up the predicted TFP gap between the British and Italian samples,
which amounts, on average, to 13 per cent, into the part accounted by the endowment
of the workplace and the part accounted by the efficacy of the endowment. It is found
that 40 per cent of the productivity gap is ascribable to differences in the endowment of
innovative practices, skills and industrial relations and the remaining 60 per cent is
ascribable to the different effect of the endowment.

Concluding remarks and policy implications

The contributions to this special issue have addressed a number of questions related to
labour, productivity and growth. They deal with the impact of active labour market
policies on labour market performance (Destefanis and Mastromatteo), on the possible
trade-offs between employment and productivity growth (Marelli and Signorelli), on
the role played by total factor productivity (Fachin and Gavosto), by the system of
industrial relations (the contributions by Tronti and by Pastore), the impact of
high-performance workplace practices (Cristini and Pozzoli).
It is interesting to note that, despite the numerous and various research questions,
data used and methodologies implemented, there are several policy implications that
are common to some contributions or to all of them:
.
The contributions of Destefanis and Mastromatteo and Marelli and Signorelli
underline the importance of proactive schemes. They appear to be behind the
better labour market performance in several OECD and EU countries, with the
aim of creating “more and better jobs” (as stressed by EU’s Lisbon strategy).
.
New labour market reforms should start from the acknowledgment of the
limitations of a simplistic model of “labour market flexibility”, now achieved in
most OECD countries (including the European ones: see also Boeri and Garibaldi,
2009), either in the form of numerical (Destefanis and Mastromatteo, Marelli and
Signorelli) or wage (Pastore, and Tronti) flexibility: it cannot guarantee
productivity growth, but only lower unemployment for not an indefinite period
of time.
.
There is a need to support labour incomes, especially those of wage employees.
Real wages (Tronti) and the overall labour share (Pastore) have undergone,
specifically in Italy, dramatic reductions following the changed model of
industrial relations.
.
All contributions underline the need to introduce mechanisms to foster
productivity growth. Fachin and Gavosto, relating the productivity slowdown to
TFP slowdown (as already specified), easily identify the policy variable to
counteract previous tendencies: increasing the expenditure in research and
development. The other contributions, too, identify specific policy measures:
improving active and passive labour market policies (Destefanis and
 Mastromatteo); paying greater attention to the “better jobs” specification, Labour,
particularly by the support of human capital (Marelli and Signorelli); introducing productivity
adequate incentives in the model of industrial relations (Tronti, and Pastore); and
spreading the use of high performance workplace practices (Cristini and Pozzoli). and growth
Although all contributions to this Special Issue deal with long-run labour market
performances and growth issues, we cannot conclude this introductory essay without 711
mentioning the deep effects of the recent financial and economic crisis. After the
eruption of the financial crisis (in the Fall of 2008), the initial real effects have been
lagged (with the deepest falls in production and income in the first half of 2009) and the
subsequent effects on labour demand have been even more lagged (because of labour
hoarding practices, also depending on the specific institutional settings); also the
impact on productivity has consequently been different across countries. In any case,
employment growth has strongly decelerated or declined and unemployment has
generally risen, reaching peak values in 2010 (at least in EU countries). Furthermore,
the negative impact on unemployment is likely to persist over time because of
hysteresis effects.
Public policies have generally followed two key approaches:
(1) providing huge fiscal stimuli to keep up, through government expenditure,
aggregate demand and production; and
(2) following “passive” labour market policies, to sustain the income of the
unemployed (or workers at risk of being fired).
As regards the fiscal expenditure and its effects on labour demand and employment,
we notice that the timing of the “exit strategies” (now accelerated in the EU because of
the “sovereign debt” crisis) is crucial (see also World Bank, 2010). As regards passive
labour policies, they should be accompanied and co-ordinated with “active” labour
policies (along the lines specified in the previous part of these concluding remarks), not
only to sustain the recovery, but also to reinforce the long-run prospects of growth –
for both employment and productivity – that at the moment are so scant in many
developed countries, especially in Europe.

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About the Guest Editors

Enrico Marelli is Full Professor of Economic Policy at the University of Brescia (Italy), where he
is Head of Teaching Board for the degrees in Economics and International Economics (Faculty of
Economics). He studied at Bocconi University, at the London School of Economics, and at the
University of Pennsylvania. He has published several books and articles in a number of research
areas: labour economics and policy, international economics, transition economics, regional
economics, macroeconomics and economic policy. He has recently co-edited a volume for
Palgrave Macmillan (2010).
Francesco Pastore is Assistant Professor of Economics at Seconda Università di Napoli
(Italy), and a research fellow of IZA (Institute for the Study of Labour), Germany. He earned his
PhD in Economics from the University of Sussex, UK. His research focus is on labour economics
and the economic transition from plan to market. His papers have been published in such
journals as Journal of Economic Surveys, Economics of Education Review, Economia Politica. He
has previously co-edited a volume for Springer Verlag and a Special Issue of International
Journal of Manpower. Francesco Pastore is the corresponding author and can be contacted at:
fpastore@unina.it

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