Paul Krugman in his blog asked the question “What’s The Matter With Italy?” the question was how come the Italian worker less productive than a French worker. Several difference fundamental differences between the two countries might be the reason for the difference. Italy has higher percentage of self-employed individuals (27.0 %) than France (8.0 %)1. Italy has a lower percentage of tax compliance (62.47 %) versus France with (75.38%)2. Italy has a much lower transparence score (3.9) than France (7.0) according to Transparency International 3. Italy has a higher percentage of cash transactions (90.0%) versus France with (59.0%)4.
Self-Employed, and Cash transaction add up to the perfect storm for hiding income from the taxman, and the government, which in the end could skew the government calculation of GDP, which could cause the reported productivity per person to be understated. The failure to report all of the cash transactions in order to reduce taxable income, and the out right failure by a significant portion of the population to submit to taxing authorities, and the possible indifference of public servants via verbatim compliance with a myriad of complex, contradictory, and intractable rules and regulations, could also add to difference. Corruption could also play a significant factor.
Just how accurate this last source is somewhat questionable?