Rome, at 13:00 – Sergio De Nardis, Nomisma’s Chief Economist, will hold the next CSC Lunch Seminar of Confindustria, at their headquarters in Viale dell’Astronomia 30.

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Rome, Roma Tre University, Rossi-Doria Center, at 15.30 - Sergio De Nardis, Nomisma's chief economist, will participate as a discussant at the conference to present the CER report "International integration and innovation".

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Rome, National Administration School, 3:00 p.m. - Sergio De Nardis, Nomisma’s chief economist, is presenting the report "Stagnation and investment policy in Europe".

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Rome, Federation of Banks, Insurance and Finance, 9:00 a.m. - Sergio De Nardis, Nomisma’s Chief Economist, is speaking at the workshop of the conference "Three moves to close the case on the crisis: the economic outlook 2014-2018" organised by Economia Reale.

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Rome, Istat, Aula Magna, 9:15 a.m. - Istat Workshop "Structure and performance of Italian firms: new statistics to measure economic performance, complexity and potential for growth of the productive system." Sergio de Nardis, Nomisma's Chief Economist, is speaking in the round table discussion chaired by Giovanni Barbieri, Central Director for structural statistics on companies.

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Rome, Palazzo Koch, 9:00 a.m. - Bank of Italy Conference "The effects of the crisis on production capacity and household spending in Italy." Sergio de Nardis, Nomisma's Chief Economist, is speaking during the afternoon session of the Round Table.

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Nomisma, “Sala Incontri” Conference Room, 5:30 p.m., Presentation of the book by Patrizio Bianchi "Globalisation, crisis and industrial reorganisation."

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Rome, 10.30 a.m. – Sergio De Nardis, Nomisma’s Chief Economist, is speaking at the Conference of the Bank of Italy "Competition, market and growth in Italy: the long run," in the session "The Facts".

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Francesco Capobianco, Nomisma Economist, talks with Sergio De Nardis (Chief Economist) and Giulio Santagata (Board Member, Special Advisor for Strategic Development) 
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Francesco Capobianco
Since the end of last month, ISTAT has starting releasing new Economic Accounts for Italy based on the SEC 2010 classification as part of a broader revision of national accounts at the European level. Compared to the estimates produced on the basis of the old SEC 95 categorisation that were released in March by the national institute of statistics, some differences regarding the main economic aggregates have emerged. Nominal GDP for 2013 was revised upwards 3.8%, not affecting the annual rate of change in the chain index values of GDP in terms of volume (-1.9% for 2013), which were entirely due to elements of domestic demand, excluding inventories.
Besides the implications of these changes for the net debt/GDP ratio, which went from -3% to -2.8%, the figures that seem to be most interesting are those that are related to one of the focal points of the Italian economy: the productivity of industry.

Sergio De Nardis
The revision of the national accounts has brought some good news on this front, confirming the perception of an industry that is better than what has been described many times:  the Italian industrial sector has been far less labour intensive and thus more efficient than was previously believed. The substantial downward revision of the labour input has resulted in a substantial increase in the level of statistically measured labour productivity: taking into consideration the average for the years 2009-2013, the value added per employee at current prices is much higher than under the previous accounting system, by 14% for industry (including energy production) and by 11.5% for manufacturing alone.
Even in the period prior to the still-ongoing crisis, the ratio between value added (in current prices) and ULA (units of full-time equivalent labour inputs) was shown to be much higher than that registered under the previous accounting system: +13.2% in industry and 11.8% in manufacturing.
This is a rather radical change, a different industry.

Giulio Santagata
Consequently, these calculations make it easier to address a central issue in understanding the current crisis and, realistically, some of the long-term dynamics of the Italian economy: how can one reconcile a steady increase in the Italian market shares of certain productions with a stagnant productivity?
Based on historic series of data since 2000, it is reasonable to assert that Italian manufacturing has responded well to the introduction of the euro, reorganising production and profitably using the stability of interest rates, so that between 2000 and 2013 the same invariance in the comparative advantages/disadvantages in the manufacturing sectoral hierarchy as compared to the Euro area can be interpreted as corresponding to real productivity advantages, as is shown in the rest of this newsletter.  

Francesco Capobianco
Yet if the value added per employee is considerably higher than was previously believed, who has taken “advantage” of this greater productivity? Where did this higher value added end up?

Sergio De Nardis
Company profits benefitted the most. On average, during the five years from 2009 to 2013, the wage share--meaning the share of value added absorbed into labour income, dependent and independent--was lower than in the old accounts by 5 percentage points in industry and almost 4 percentage points in manufacturing. This also occurred in the pre-crisis years: -4.3 percentage points in industry, -3.7 percentage points in manufacturing.

Francesco Capobianco
In other words, the share of profits has increased at the expense of wages. Shouldn’t this have led to investments by businesses?

Giulio Santagata
The perception is that during the phase of reorganisation after the adoption of the euro, companies put resources into place, but then there was no longer any sign of this, as has happened in other European contexts.  Another possible explanation for the decrease in the wage share can be found in the phenomena of delocalisation of more labour-intensive productions and, in some cases, the adoption of “technology  instead of labour”. A larger share of profits combined with higher productivity, however, is consistent with the increased competitiveness of our industrial sector, particularly with regard to the trend in national exports, which between 2010 and 2013 grew as much as German exports.

Francesco Capobianco
Until now we have discussed levels, but also looking at dynamics one can note some improvements: between 2009 and 2013, the value added in terms of volume per employee increased by 11.2%, rather than 9.5% as shown under the old accounting. This means 0.4% more per year, a particularly positive statistic if one takes into account the fact that this period was especially difficult for our manufacturing.
A further confirmation comes from very recent data on the period 2000-2008, during which the trend in productivity in terms of volume appears 0.2% higher than what was previously calculated. How significant are these differences?

Sergio De Nardis
In my opinion, rather significant. I have never agreed with the affirmation that “for fifteen years industrial productivity has not been growing”. This is incorrect. The crisis in manufacturing productivity over the past decade was all concentrated within the first three years of the adoption of the euro between 2000 and 2003, then through 2007 there was an acceleration that brought the rate of growth back to the one registered in the 1990s. This was the result of the post-euro reoganisation that Santagata had mentioned earlier. Successively there was the double recession that ended up compromising that acceleration. Well, now the corrections of the new national accounting can better clarify this picture: the productivity crisis of 2000-2003 was less serious, the acceleration of 2003-2007 a bit stronger, and productivity dynamics over the course of the last two recessions were more robust than believed.
But there is a point to keep in mind: we are talking about averages. Now we know that the distribution of productivity in businesses is highly uneven and asymmetric in Italy, as well as in Germany and other countries: the best companies are relatively few, around 20% if we consider as “the best” those that export, and then there are the others, which are often very distant from the first in the class.  Thus, focusing only on the average can be misleading. Rather than reinforcing the productivity average, it is necessary to raise the median, that is, , increasing the number of companies that can make a qualitative leap or “shorten” the long tail of the distribution of those that are far from adequate levels of productive efficiency.

Francesco Capobianco
In any case, the problem of unemployment remains. International observers, as well as our own territorial surveys, confirm that a recovery to pre-crisis employment levels in the industrial sector is an objective that will be difficult reach and, in any case, cannot be achieved over the short- to medium term. Possible paths to a quicker recovery at the systemic level need to be implemented at both local and European levels. Many have proposed introducing German-style mini-jobs: can these represent a solution or would they create the same problems that plague Italian non-permanent employees and those subject to charging VAT?

Giulio Santagata
The German mini-jobs solution is not applicable to the Italian context and is, probably, not even sustainable over time in Germany, where about 25% of the employees (around eight million people) receive less than five hundred euros per month. This type of solution requires a deep reflection regarding the sustainability of social security: how will these workers receive adequate pensions? Will the welfare system be able to sustain the weight of these generations of mini-workers?
Rather, it would be appropriate to focus on welfare as an area for direct employment, following the example of the most successful experiences, such as social cooperatives that manage to stay in the market by offering adequate wages and a service that cannot be delocalised and has by now become indispensable in the territories in which it is present. Besides welfare, the counterweight to missing industrial jobs must come from creative and cultural businesses and those in the tourism sector, where the most qualified human resources can still find still unexplored areas of employment.

Francesco Capobianco
Obviously these opportunities for new employment can only represent a complement to the larger pool of opportunities represented by industrial companies that are able to meet the challenges of global competition, namely, those companies that by relying on specialisation and on innovation have seen an increase in their shares of the foreign market, as pointed out by De Nardis in today’s Scenario.

Giulio Santagata
In effect, it is not true that Italian companies are lagging behind in terms of innovation. First of all, there is strong incremental innovation, dictated by the speed of adaptation of industrial enterprises to international changes. In addition to this, the Italian leadership is certain in intermediate productions and in the field of process innovation. What is really missing is the tout court product innovation, and it is in this area that Italian industry is called upon to play the most difficult game.

Sergio De Nardis
Clearly, in the absence of a national monetary policy and with Germany determined to keep inflation at around 1%, the pursuit of higher competitiveness in Europe pushes towards stagnant, basically deflationary scenarios. And this would be so even with a labour market that is more efficient than the current one. This is a big problem. Therefore, the new ISTAT estimates are important not only in outlining the new forecast scenarios, but also in defining more accurately the scope of economic policy measures that are aimed at supporting the competitiveness of businesses and employment.

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University of Ancona – Sergio De Nardis, Nomisma’s Chief Economist, is a keynote speaker at the XXXVIII Conference on Economics and Industrial Policy of "Industry - Magazine on economics and industrial policy" promoted by the Marche Polytechnic University and ISTAO.

The speech will focus on “Industrial enterprises in international competition and in the long recession: adjustments and perspectives” within the session titled "Return to growth: the organizational and entrepreneurial factors"

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