Productivity Cannot Be Balanced with Computers
If you think that Southern European countries should fill the productivity gap by subsidizing IT adoption, then you'd better think harder. It actually may lower productivity even further. "Unproductive firms that should not adopt IT would be encouraged to do it. It would be a waste of resources. Low IT adoption is a symptom, not the problem".
Tom Schmitz is Assistant Professor of Economics at the Bocconi University. He addressed the topic in The IT Revolution and Southern Europe's Two Lost Decades, co-authored with Fabiano Schivardi. They investigated the determinants of Italy, Spain and Portugal's lower productivity growth compared to Germany and the U.S. "Literature has documented the influence of management practices and technology adoption at the firm level. We adopted a more macroeconomic approach and looked at the growth divergence between Northern and Southern European countries". The authors used a subset of the World Management Survey on manufacturing firms of intermediate size in the years 1995-2008. They find out that more than one third of the North-South productivity gap is caused by inefficient management practices that limited gains from the IT revolution. They identified three reasons responsible for the divergence.
"The most obvious one is the direct effect of inefficient management practices that lowers firms' productivity gains from IT. The second one is more indirect: IT increases the importance of management practices, making its inefficiencies even more prominent". And then, there is immigration: IT-driven wage increases in Northern European countries incentive high-skill emigration from the South. "We can only speculate about which reforms policymakers from Southern Europe could implement to reduce differences in management practices". Here are a couple of suggestions. Policymakers could promote knowledge spillovers from multinational firms coming from countries with superior management practices. A judicial system that efficiently resolves conflicts between family business owners and non-family executives would put firms in the position of decentralizing and delegating to more efficient managements.
Read more about this topic:
Gianmarco Ottaviano. The Cost of Non-Europe
Electoral Results Explained Through Emotion Theory
The Four Pillars of European Capitalism
Human Rights Are Increasingly Important
Transparency Means Banks Won't Need to Be Saved
The Robot Vote Has Brought Success for Nationalists
The Importance of Reputation in Public Contract Bids
Finding a Compromise for Tomorrow's Relations Between UE and UK
Foreign CEOs Get More out of Acquisitions
When It Comes to Fake News, Don't Imitate the USA
A Common Identity Could Derive from the Protection of Civil Rights
Europe Should Opt for Qualified Majority Voting on Taxation Issues
My Europe: Seven Bocconi alumni who work for various EU institutions tell us what Europe means to them