Italy’s economic growth has stagnated since the late 1990s, diverging from the trajectory of other advanced economies after decades of convergence driven by robust productivity gains. This paper examines the roots of Italy’s persistent productivity slowdown in a historical, sectoral, and international context. It identifies weak MFP growth and capital deepening, particularly in intangible and digital assets, as well as underperformance in knowledge -intensive industries as critical contributors. Three self-reinforcing structural traps have hindered innovation, digital transformation, and efficient resource allocation: skills deficit, small scale of firms, and risk aversion. These traps, deeply rooted in Italy’s economic and institutional fabric, have limited the country’s ability to capitalize on globalization and technological change. Applying the van Ark et al. (2023) policy framework, the paper reviews Italian productivity policies over the past forty years, highlighting a persistent pattern of fragmented, delayed, and ineffectively executed reforms. A policy agenda is sketched to unlock the structural traps and reposition Italy on a dynamic productivity path.
Authors Giuseppe Nicoletti and Iris Smiderle