Giuseppe Travaglini

The Productivity Slowdown Puzzle. Technological and Non-technological Shocks in the Labor Market

In this paper we address the question of whether labor supply shifts are the only source of the productivity slowdown that occurred across European countries in the last 15 years. This explanation implies that labor demand shifts are irrelevant. Using a simple dynamic model of the labor market, we show that the poor economic performance of the European countries can only be accounted for by a combination of two shocks: an adverse technological shock to the labor demand and a positive non-technological shock to the labor supply resulting from changes in institutions. We use a structural VAR model to estimate the contribution of these two shocks to the dynamics of employment and productivity. Our main conclusion is that technological shocks explain the decrease of the growth rate of productivity but not the increase in employment. The non-technological shocks, on the other hand, can capture the increase of employment but not the slowdown of labor productivity. Thus, both shocks are necessary to provide a complete picture of the employment-productivity trade off in Europe during the last 15 years.

How do future constraints affect current investment

In this paper we build up a theoretical continuous time model to study how future constraints affect current investment decisions. We show that firms constrained in the future, but currently unconstrained, select an optimizing investment trajectory different from that of an identical firm that will never be constrained. We provide a complete characterization of the formal solution to the constrained problem: in particular, we show that two simple conditions allow us to compute the trajectory for the (potentially) constrained firm. A basic result of our analysis is that the effect of future financing constraints are captured by the current q value of the firm.

Financial constraints and investment decisions

In what follows we show that liquidity constraints can affect a firms investment even when the constraints are not currently effective. This happens when, at any given time, the firm believes that internal finance is likely to become a constraint in the future. In these circumstances, the value of the firm becomes a non-monotonic functional form of the fundamental. Thus, in a dynamic setting, the potential barrier to internal liquidity expansion exerts a global effect on the firms investment policy, lowering its desired investment profile. Copyright 2001 by Scottish Economic Society.

Optimal abatement investment and environmental policies under pollution uncertainty

In this paper we present a continuous time model with reversible abatement capital in order to analyze the effects of environmental policies on the value of the firm and investment decisions. We show that the effects depend on what sort of future policy are implemented. We focus on investment effects of changes in corrective taxes to control the use of polluting inputs, and subsidies to promote abatement investment. We show that (1) while taxes have a depressive effect on capital accumulation, subsidies boost investment; (2) the impact of these policies on the value of the firm is ambiguous. This latter result has important empirical implications insofar as investment are based on the average value of the firm rather than the (unobservable) marginal value.

Il rallentamento della produttività del lavoro e la crescita dell’occupazione. Il ruolo del progresso tecnologico e della flessibilità del lavoro

In this paper we argue that the deceleration of labor productivity is at the root of the slowdown of the European economic growth over the last fifteen years. Using a simple dynamic model of the labor market, we show that this poor performance can only be accounted for by a combination of two shocks: an adverse technological shock to the labor demand and a positive non technological shock to the labor supply. We are interested in the long run properties of the model, so we use economic theory to study the long run impacts of different shocks to identify the model. Shocks which affect permanently productivity can lead to a transition from one steady state to another. We use a structural VAR to estimate the contribution of the technological and non technological shocks to the dynamics of employment and labor productivity. Our main result is that the technological shock is able to explain the decrease of the growth rate of productivity but not the increase in employment. In turn, the non technological shock can capture the dynamics of employment but not the slowdown of labor productivity. Thus, both shocks are necessary to provide a complete picture of the employment-productivity trade-off in Europe during the last ten years.

Investment, Productivity and Employment in the Italian Economy

This paper analyzes the effect of institutional structure, regulations, technological progress, and labor market flexibility on productivity in the Italian economy within the framework of the representative agent model of Saltari and Travaglini (2007). The core model is shown to be too restrictive to provide a good representation of the Italian economy. Broadening the view of the way in which firms take account of the costs of changing the labor force and investment achieves a more satisfactory representation of the dynamics of the productive sector of the economy while still retaining the spirit of the core model. Institutional or market structures, regulations, and other factors are incorporated in the system through modifications to the production function, the demand and supply functions for labor. A full-information, Gaussian estimator of a differential equation system is used throughout. As the constraints on the system arise from both macro-economic theory and the institutional structure of the Italian economy, this estimator provides a much more stringent test of all the hypotheses embedded in the model than many other studies. The model provides a foundation for a study of the extent to which, over time, changes in regulations or market structure might allow firms to reallocate resources to take better advantage of the skills available in the labor force within the context of a segmented labor market with varying efficiencies. The model lends itself to a policy analysis of the effects of these changes on the workings of the labor market as the ease with which firms may change their labor force determine the dynamics of the interaction between firms and labor and the path over time of labor and capital themselves.

Behavioral portfolio choice and disappointment aversion: An analytical solution with small risks

The standard portfolio model based on expected utility (EU) theory predicts a large equity position for most households. Empirical analysis demonstrates, however, that the composition of household’s wealth is characterized by a small proportion of risky assets. A consolidated empirical literature providesmeasures of these financial phenomena (Brandolini et al., 2004; Faiella and Neri, 2004; Giannetti and Koskinen, 2009; Heaton and Lucas, 1996; Mankiw and Zeldes, 1991; Guiso and Zingales unpublished). For instance, in Italy over the period 1965–2006 the percentage of stocks held by households has been on average 9% of the total wealth. Similar proportions can be found in the portfolio of families in United States, France, Germany and Great Britain.

Componenti permanenti e transitorie degli investimenti in Italia

This paper studies the dynamic and stochastic properties of fixed investments (IL) for five Italian sectors and for the period 1930-1991. Moreover, it analyses the relationship between the trend and cyclical innovations of IL and between these two types of innovations with those of GDP, real money balances and the real interest rate. We find that the five sectors share four common trends, but only one common cycle. As for innovations, trend and cyclical innovations are in general negatively correlated with the single exception of GDP. Trend innovations are generally more important than cyclical innovations, but in the case of real money balances the opposite is true. Finally, we only find a statistically significant correlation between investment trend innovations and GDP trend innovations: a result which offers strong support in favor of the accelerative hypothesis, i.e. one of the most popular models in the study of investment decisions.

The productivity slowdown puzzle of European countries: a focus on Italy

With the end of the Twentieth century and the beginning of the new millennium many European countries, especially those of the Southern Europe, experienced a structural economic change. The slowdown of the GDP growth rate, the deterioration of labor productivity, total factor productivity and investments are all common facts. In this paper we use the growth accounting to measure the contribution of different sources to economic growth in some European countries and in U.S.. We attempt to disentangle the determinants of the European slowdown during the Great Recession, with a special focus on Italy. The analysis suggests that the productivity.

Pollution Externality and Pollution Abatement Capital: A Closed-Form Solution for the Investment Rate of a Green Firm with Uncertainty and Irreversibility

This paper focuses on environmental policies aimed at rising investment in pollution abatement capital. Capital irreversibility is not postulated but endogenized using a quadratic adjustment cost function. We assume that ecological uncertainty, i.e. uncertainty over the dynamics of pollution, affects firm investment decisions. Closed-form solutions for the investment and value of a green firm are derived, showing that irreversibility reduces its fundamental value. The effects of environmental policies are investigated considering taxes on polluting inputs and subsidies to reduce the cost of abatement capital. Environmental policies promoted to enforce abatement capital may generate the unexpected result of reducing the abatement investment rate.