Firm turnover and labor productivity growth in the Italian mechanical sector

This paper provides estimates of labor productivity growth in Italian mechanical sector during the period 1997-2002 analyzing its determinants with particular attention to the role played by turnover (exits and entrants) and company size. Data come from the longitudinal company accounts database of Research Centre of Unioncamere. The analysis put in evidence the global slowdown of productivity and the positive impact on productivity growth given by gross firm turnover. Transition matrices reveal a relevant degree of persistence in the period and a positive relation of this persistence with firm size. We apply the decomposition of [Baily et a/., 19961 to analyse the role of turnover: survivors account in negative of overall growth, on the contrary, the contribution of entrants and exits is positive and very high.