By using a vector autoregressive model, this paper decomposes labor productivity of the Italian energy sector, into technological and non technological shocks. We take the innovative approach to use economic theory, about long-run impacts of di¤erent shocks, to identify the empirical model, and to measure the labor productivity response to each shock, separately. The key identifying restriction is that the level of productivity is determined in the long-run by shocks to technology. We find that: (1) productivity responds positively to technological shocks, leading to a transition from one equilibrium to another; (2) capital accumulation shows a persistent decline in response to a positive technological shock, revealing that, in energy sector, technology and capital stock are substitutes. Yet, non technological shocks play a minor and transitory role in explaining productivity change. Results show that shocks that move the productivity at business cycle frequencies may also a¤ect the dynamics of the energy sector in the long-run. JEL codes: C32, O47, Q4,Q43. Key words: Energy Sector, SVAR, Productivity, Shocks.
Available at: http://works.bepress.com/giuseppe_travaglini/20/