Decomposing productivity differential: evidence from foreign owned and domestic firms in Italy

Using the idea of the multidimensional generalization of the Duncans’ index (Silber 1992), the productivity per worker differential across groups of firms can be decomposed into different components attributed to differences in: sectoral productivity, investment in human and physical capital, employment and other determinants. More specifically, for decomposing group productivity differential we propose an Oaxaca’s decomposition – based approach which assumes a Reimer’s weighting scheme. An application of the decomposing method aimed at evaluating productivity differences across foreign owned and domestic firms in Italy is also provided.