Tyler Cowen offers more thoughts on small firms and pathetic Italian per capita GDP growth. Another neglected element of the story is what I’ve decided I’m going to call Feminist Growth Theory. In the richer countries, including both Big Government Sweden and Small Government America, you have much higher levels of women’s workforce participation:
Southern European countries (and Japan) have a very conservative approach to family structure issues that contrasts sharply with both Anglophone and Nordic norms and depresses output. This is in particular a big deal for public debt issues, since it’s obviously not the case that non-working Italian women are sitting around all day doing nothing. Instead, they’re doing unpaid household work that’s not taxed. Make no mistake, productivity per hour worked in Italy is also low and stagnating compared to the U.S. and Sweden, so it’s not a pure labor supply issue. Still, my suspicion is that even here the failure to take adequate advantage of women’s potential to engage in market production is a major source of productivity stagnation. If you look at the U.S. labor market, maids have low earnings and low productivity. If the median working woman quit her job and went to work as a maid, the economic impact would be immiserating. Having the woman work as an unpaid maid for her husband doesn’t really change the calculus, though of course he eats better under this scenario. I note that in Milan, which is very rich compared to the rest of Italy, there are McDonaldses everywhere.