Measuring bipolarization in labour productivity in Italy: a new index and its decomposition by sectors and regional factors

This paper explores bipolarization in labour productivity among Italian regions. An index to measure bipolarization in labour productivity distribution is suggested. The index can be decomposed by sectors, explaining the contribution of each sector to bipolarization. From this sectoral decomposition, a further decomposition based on a reformulation of shift-share analysis is obtained. This shift-share decomposition captures the effects of regional factors on bipolarization since the roles played by the disparities in sectoral labour productivities, industry-mix and allocation of workers across sectors are explained. The index and its decompositions are used to measure the bipolarization in the aggregate labour productivity distribution across Italian regions over the 2000-2011 period. Our findings show that bipolarization is not particularly high and is mainly attributable to the disparities in sectoral labour productivities between regions.