Joint work with Francesco del Prato. Project approved for the VisitINPS 2020 program (access to Italian matched employer-employee data).

Abstract. In reviewing tentative explanations for the stagnation of productivity growth which is observed in the Italian economy, we argue that labor market policies may have played a role by worsening factor misallocation across firms. We assess this hypothesis through a battery of empirical tests using matched employer-employee data. We document a new stylized fact: following the reforms, the variance of total factor productivity has increased across industries of the Italian economy, consistently with our misallocation hypothesis.