OCDE - Rebooting Veneto’s competitiveness through productivity growth

OECD Local Economic and Employment Development (LEED) Papers 2026/10 Rebooting Veneto’s competitiveness through productivity growth

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REBOOTING VENETO’S COMPETITIVENESS THROUGH PRODUCTIVITY GROWTH © OECD 2026

OECD Local Economic and Employment Development (LEED) Papers

Rebooting Veneto’s competitiveness through productivity growth

Veneto is one of Europe’s manufacturing powerhouses, generating 9.5% of Italy’s GDP. While labour productivity growth has been slower than in peer regions since 2005, the region has maintained international competitiveness, supported by contained labour costs and high employment rates. The analysis highlights opportunities to raise productivity by further developing high value added activities, including by strengthening links between manufacturing and services and by expanding private business investment. There is scope for improving skills matching, notably in STEM fields, leveraging the strong enrolment of local students in those subjects. Veneto’s labour market is also gradually adapting to the green transition, with around 30% of recent job postings involving green tasks.

JEL codes: D24, J21, J24, L11, O3, O47, R11

Keywords: subnational productivity, international comparison, drivers of productivity, SMEs, manufacturing servitisation, labour market policies, skills

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REBOOTING VENETO’S COMPETITIVENESS THROUGH PRODUCTIVITY GROWTH © OECD 2026

ABOUT THE OECD The OECD is a multi-disciplinary inter-governmental organisation with member c ountries which engages in its work an increasing number of nonmembers from all regions of the world. The Organisation’s core mission today is to help governments work together towards a stronger, cleaner, fa irer global economy. Through its network of specialised committees and working groups, the OECD prov ides a setting where

in its work an increasing number of nonmembers from all regions of the world. The Organisation’s core mission today is to help governments work together towards a stronger, cleaner, fa irer global economy. Through its network of specialised committees and working groups, the OECD prov ides a setting where governments compare policy experiences, seek answers to common problems, identify good practice, and co-ordinate domestic and international policies. More information available: www.oecd.org. ABOUT OECD LOCAL ECONOMIC AND EMPLOYMENT DEVELOPMENT (LEED) PAPERS The OECD Local Economic and Employment Development (LEED) Programme Papers present innovative ideas and practical examples on how to boost local development and job creation. A wide range of topics are addressed, such as employment and skills; entrepreneurship; the social economy and soci al innovation; culture; and local capacity building, among others. The series highli ghts in particular policies to support disadvantaged places and people, such as the low skilled, the unemployed, migrants, youth and seniors. This work is issued under the responsibility of the Secretary-General o f the OECD, and does not necessarily reflect the official views of OECD Member countries. This document, as well as any statistical data and map included herein, are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area.

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Acknowledgements This paper was prepared within the framework of the Spatial Productivity Lab (SPL) Prog ramme at the OECD Trento Centre for Local Development. The Trento Centre is part of the Local Employ ment and Economic Development (LEED) Programme at the OECD Centre for Entrepreneurship, SMEs, Regions and Cities (CFE), led by Lamia Kamal-Chaoui, Director. This paper was made possible through a voluntary contribution by Veneto Lavoro, the public employment services agency of the Region of Veneto. The paper was authored by Wessel Vermeulen, Economist at the Spatial Productivity Lab (SPL), with input from Zuzana Zavarska (SPL) and Michela Meghnagi (CFE), under the supervisi on of Carlo Menon, Manager of the SPL. Adelaide Fabbi and Giuseppe Cappellari provided outstanding research assistan ce

from Zuzana Zavarska (SPL) and Michela Meghnagi (CFE), under the supervisi on of Carlo Menon, Manager of the SPL. Adelaide Fabbi and Giuseppe Cappellari provided outstanding research assistan ce during their internships at the SPL. Alessandra Proto, Head of the OECD Trento C entre for Local Development, Rudiger Ahrend, Head of the Economic Analysis, Data and Statistics Di vision, Karen Maguire, Senior Counsellor, and Nadim Ahmad, Deputy Director of CFE, provided guidance and comments. Support from Elisa Campestrin and Bridgette Joyce for production and Roberto Chizzali for administration are gratefully acknowledged. The paper benefitted from comments and discussion with Tiziano Barone, Letizia Bertazzon, Elisabetta Grigoletto, Stefania Maschio, Francesca Nadalin and Ilaria Rocco (Veneto Lavoro), Giancarlo Corò (Venice Ca’ Foscari University), Federico Callegari (Chamber of Commerce of Belluno and Treviso) and participants at the workshop at Veneto Lavoro on 24 February 2026. The paper was submitted to the OECD Co-operative Action Programme on Local Employment and Economic Development Directing Committee on 23 April 2026 for comment under the cote

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REBOOTING VENETO’S COMPETITIVENESS THROUGH PRODUCTIVITY GROWTH © OECD 2026

Table of contents Acknowledgements 3

Executive summary 6 1 Preserving competitiveness by reviving productivity growth 8 Comparing Veneto with international peers 9 Labour productivity trends have stalled since early 2000 11 Domestic and foreign investments in fixed capital could boost technology adoption and innovation-led growth 14 2 Boosting productivity through innovation and integrated services 16 Labour productivity has stalled in both manufacturing and tradable services 16 Veneto’s manufacturing sector lacks firms at the productivity frontier 20 Manufacturing can boost productivity and innovation through greater integration of services 22

innovation-led growth 14 2 Boosting productivity through innovation and integrated services 16 Labour productivity has stalled in both manufacturing and tradable services 16 Veneto’s manufacturing sector lacks firms at the productivity frontier 20 Manufacturing can boost productivity and innovation through greater integration of services 22 3 Matching and growing skills for workers 24 A high employment rate but many young workers have low job security 25 A smaller share of workers use digital tools at the workplace and few receive formal training for new skills 29 4 A labour market ready for the green transition 33 Veneto has many vulnerable workers, but green-task job opportunities abound 34 Greening the labour market by transitioning out of vulnerable jobs 36 References 40 Annex A. Background material 46

FIGURES Figure 1. Veneto’s international and national peer regions 10 Figure 2. Veneto’s productivity gap with peers emerged in the early 2000s 11 Figure 3. Comparison in peer region selection 12 Figure 4. The gap in GDP per capita reduced as employment-to-population ratio increased since 2015 13 Figure 5. To maintain competitiveness despite lower productivity, real wage growth fell behind 13 Figure 6. The productivity gap may in part be due to low investments 14 Figure 7. In the manufacturing sector, Veneto’s productivity gap has grown relative to its peers 17 Figure 8. Veneto’s manufacturing is comparatively large, but its productivity lags peers 18 Figure 9. The top 10% most productive manufacturing firms have the largest gap to fill compared to peers 20 5

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Figure 10. Veneto specialises in low-tech manufacturing and lacks large firms in tradable sectors that can become regional champions 21 Figure 11. 36% of manufacturing workers are employed in a firm that is active in services too. Those firms have a 5-10% higher labour productivity 22

Figure 10. Veneto specialises in low-tech manufacturing and lacks large firms in tradable sectors that can become regional champions 21 Figure 11. 36% of manufacturing workers are employed in a firm that is active in services too. Those firms have a 5-10% higher labour productivity 22 Figure 12. There are fewer marketing, research, ICT, or sales employees in Veneto manufacturing 23 Figure 13. Many young workers in Italian regions have fixed-term contracts 25 Figure 14. Worker education level and firm-level productivity open pathways to stable employment 26 Figure 15. Veneto employs a lower share of tertiary educated workers 27 Figure 16. Many Science, Tech., Engineering and Maths (STEM) students are not in STEM jobs 28 Figure 17. In Veneto, only one-third (32%) of workers found their job through formal channels 28 Figure 18. Workers in Veneto have weaker, literacy, numerical, and problem solving skills, use digital tools less often and do more physical work 30 Figure 19. Fewer workers are receiving formal education in Veneto 31 Figure 20. Veneto has a higher share of vulnerable jobs driven by its manufacturing share and fewer job postings for green-task jobs 35 Figure 21. The share of workers switching from vulnerable to non-vulnerable jobs has increased fourfold since 2018 37 Figure 22. Lower educated workers and men are more likely to be in vulnerable jobs 38

TABLES Table A A.1. Sectoral groups with corresponding NACE sector divisions 46 Table A A.2. STEM occupations 48 Table A A.3. Services occupations 48 Table A A.4. Occupational distribution of workers in manufacturing firms working in services 50

BOXES Box 1. The Veneto Region: Governance and economic context 9 Box 2. The selection of the peer regions 10 Box 3. Alternative selection of peer regions 12 Box 4. Attracting and optimising the impact of FDI in regions 15 Box 5. Tourism and creative clusters in Veneto’s economy 18

Box 2. The selection of the peer regions 10 Box 3. Alternative selection of peer regions 12 Box 4. Attracting and optimising the impact of FDI in regions 15 Box 5. Tourism and creative clusters in Veneto’s economy 18 Box 6. While Veneto firms are strong in goods exporters, further analysis should assess the potential of services exports 19 Box 7. Defining formal and informal learning among workers 30 Box 8. The Dutch life-long learning strategy 32 Box 9. Italy’s national plan for greenhouse gas emissions is on course to achieve its own commitments, but it falls short of the European Union Fit-for-55 targets 34 Box 10. Greening the manufacturing sector: the case of Baden-Württemberg 36 Box 11. Reflecting regional skills needs in the analysis of green jobs and skills in France 396 

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Executive summary With stalling productivity, Veneto remains competitive given lower wage increases than peers Veneto is a large region in the north of Italy and one of the leading European manu facturing powerhouses. Veneto is a region of 4.9 million inhabitants that contributes 9.5% of Italian GDP. Manufacturing accounted for over 34% of Gross Value Added (GVA) and 25% of employment in 2023 , with medium and high-tech activities absorbing about one third of it, in line with peer reg ions. Conversely, the information and communication sector and professional, technical and administrative services together account for only 15% of business GVA, compared to 22% among peer regions. Between 2005 and 2024, Veneto’s labour productivity accumulated a gap of 12 percentage points (p.p.) relative to 11 European peer regions that had a similar level of labour pr oductivity in 2005. The gap results from a stagnating trend in Veneto, while most peer regions continued growing, with the

Between 2005 and 2024, Veneto’s labour productivity accumulated a gap of 12 percentage points (p.p.) relative to 11 European peer regions that had a similar level of labour pr oductivity in 2005. The gap results from a stagnating trend in Veneto, while most peer regions continued growing, with the notable exception of the other Italian peer regions. In addition, the share of the population in employment grew at a lower rate in Veneto than in peers . Jointly, this resulted in a GDP per capita growth of 5.5% between 2005 and 2024 in Veneto, relative to 22% in peer regions. Despite lagging productivity growth, Veneto remains internationally competitive because real wage growth stalled between 2005 and 2024 . The average compensation per employee in Veneto was 28% below peer regions in 2005 and this gap increased to 37% in 2024. Lower wages translate into lower unit labour costs and thus higher competitiveness, which is a key driver of growth in an export-led economy. However, it raises concerns about the ability to retain and attract workers and create inc entives to invest in education, in a context of growing skill shortages. Competitiveness based on higher value added, rather than low cost, requires stronger integration of manufacturing and services Veneto’s manufacturing sector lacks firms at the productivity frontier, especially as large firms are fewer, smaller and less productive than in peer regions. While manufacturing is more important in the regional economy relative to most peer regions, all peer regions had a higher productivity level in manufacturing in 2022 than Veneto and all of them grew their productivity in manu facturing more since

2005. Small and large manufacturing firms in Veneto show a productivity gap compared to their peers.

However, the gap is largest for the top 10% of large manufacturing firms with more than 250 employees, which are 67% less productive than the top performers in the peer region. The dearth of producti vity champions partially reflects the scarcity of very large firms. Manufacturing can boost productivity and innovation by further integrating services activities, such

which are 67% less productive than the top performers in the peer region. The dearth of producti vity champions partially reflects the scarcity of very large firms. Manufacturing can boost productivity and innovation by further integrating services activities, such as design, software development or marketing. Manufacturing firms in Veneto that also employ workers in such services activities are about 5% to 10% more productive. However, there is room for furthe r service integration since Veneto manufacturers employ 10% of their workforce in R&D, ICT and marketi ng occupations, compared to more than 20% in peer regions. Veneto can exploit its international cost competitiveness to boost private sector capital investments. In 2023, investments per employee were 12% lower in Veneto compared to peer regions , 7

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while no investment gap existed in 2005. The gap has narrowed since its peak in 2014 at 45%. To further reduce the investment gap, Veneto may need to review policies to attract foreign direct investments (FDI), currently below 0.5% of regional GDP, relative to over 1% among some of the peer regions. In addition to cost competitiveness, local universities and transport infrastructure are potential att raction factors. Workers would benefit from better matching of talent to the right jobs and more formal training Veneto has low unemployment rates, but the share of tertiary educated workers is about half that of peer regions. The employment and unemployment rates in Veneto outperform the Italian national average and while the unemployment rate is on par with many of its peer regions , the growth in the employment rate has been less steep over the last two decades compared to peers. However, the workforce has lower education levels. At 20% in 2023, the share of tertiary educated workers in Veneto i s more than 20 p.p. below that of peer regions. This in part reflects the smaller weight of knowledge-intensive services, as well as weaker incentives to invest in education given the lower wages.

population ageing. As the demand for jobs changes, workers must adapt. Local policies play a key role in supporting them through job-to-job transitions. This paper focuses on the green transition as a recent and relevant case to inform responses to future challenges. With a large manufacturing sector, a quarter of Veneto’s workforce is vu lnerable to the green transition, however three in ten job postings in 2025 are for jobs intensive in green tasks, providing career transition options. Indeed, the share of job transitions from vulnerable jobs to non-vulnerable jobs has increased fourfold, from 20% before 2017 to 80% in 2022 . Other indicators also point to a greening labour market. For example, median unemployment spells for people whose last job was a vulnera ble occupation and moved to a non-vulnerable job have declined by about 60 days since 2008. Transitioning between vulnerable jobs and green jobs in the same region can be challenging because green jobs often have higher skill requirements. Four out of five vulnerable workers are men and 91% of these workers have less than a tertiary degree. The low average educational attainment and low use of more advanced skills in Veneto relative to peer regions will affect how successful the region’s workers can adapt to the employment impact of the green transition. Targeted skills policies that account for the existing skills among current workers in vulnerable jobs and the ski lls demand for future Veneto jobs, which may be in the same or different sectors, can help prepare workers to navigate the green transition.8 

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With stalling productivity, Veneto remains competitive through lower wage increases than its peers Veneto is a region of 4.9 million inhabitants (8.1% of the Italian population) that accounts for 9.5% of Italian GDP. It is relatively intensive in industrial activity, with manufacturing accountin g for over 34% of Gross Value Added and 25% of employment in 2023. Economic activity is spread across

postings in 2025 are for jobs intensive in green tasks (henceforth “green-task jobs”), providing potential options for career transition among workers. In Veneto, the share of workers moving from one vulnerable job to another vulnerable job h as decreased from over 60% before 2017 to below 20% in 2022, a positive trend. Other indicators also point to a greening labour market. For example, median unemployment spells for people whose last job was a vulnerable occupation ha ve declined by between 60 and 80 days since 2008, depending on whether the new job was a green-task job or any other job, indicating that a career chang e away from vulnerable jobs is becoming easier. In 2022, 60% of workers taking a green-task job came from other green-task jobs, but the share of workers coming from other occupations has increased fr om 21% in 2016 to 30% in 2022. Transitioning between vulnerable jobs and green-task jobs in the same region can be challenging because green task jobs often have higher skill requirements. Four out of five vulnerable workers are men and 91% of these workers have less than a tertiary degree. The low average educational attainment and low usage of more advanced skills in Veneto rel ative to peer regions (see Chapter 3) will affect how successful Veneto workers can adapt to the employment impact of the green transition. Targeted skills policies that account for the existing skills among current workers in vulnerable jobs and the skills demand for future Veneto jobs, which may be in the same or different sectors, can help prepare workers to navigate the green transition. European Union countries have committed to the net zero emissions transition, also known as the green transition, implying profound changes for industries, regions and labour markets . The 4 A labour market ready for the green transition34 

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commitment to the green transition is part of the European Green Deal, adopted by the European Union

workforce has lower education levels. At 20% in 2023, the share of tertiary educated workers in Veneto i s more than 20 p.p. below that of peer regions. This in part reflects the smaller weight of knowledge-intensive services, as well as weaker incentives to invest in education given the lower wages. Targeted interventions are required to improve job matching for the highly educated in STEM subjects. Veneto’s hosts a large pool of students in Science, Technology, Engineering and Maths (STEM) fields. However, Veneto has the third lowest share among peer regions of STEM edu cated workers in STEM related jobs, suggesting a skills mismatch for technical expertise. The use of more open recruitment may help counteract that, as only one third of STEM workers found their job through forma l recruitment channels in 2023 in Veneto, compared to about half among most peer regions. This should be complemented by interventions aimed at strengthening the links between higher education institutions and local firms. Relative to peer regions, a smaller share of workers use digital tools at the w orkplace and few receive formal training for new skills in Veneto. One in three workers indicated that they do not work with any digital devices during their worktime in 2022, compared with one in five among peer regions. Around 20% of workers in Veneto’s manufacturing sector followed informal training that relates to their job but only 1% of Veneto’s manufacturing workers recent ly followed formal training that would provide them with a recognised degree or certificate. Veneto’s labour market is greening, but workers in vulnerable jobs will need support Recent evidence on the impact of the green transition in Veneto provides lessons for future labour market adjustments across the OECD. Several structural forces are reshaping local labour markets. These include the diffusion of generative AI, rising Chinese imports in Europ e, geopolitical tensions, and population ageing. As the demand for jobs changes, workers must adapt. Local policies play a key role in supporting them through job-to-job transitions. This paper focuses on the green transition as a recent and relevant case to inform responses to future challenges.

9.5% of Italian GDP. It is relatively intensive in industrial activity, with manufacturing accountin g for over 34% of Gross Value Added and 25% of employment in 2023. Economic activity is spread across five middle-sized urban areas ranging between 200 000 and 500 000 inhabitants, and a dense network of smaller towns, without any dominant urban agglomeration. The region hosts four public universities, and many natural and cultural attractions (including the city of Venice) make Ven eto the first region in Italy for tourism arrivals. Between 2005 and 2024, Veneto’s labour productivity fell behind by 12 percentage point s (p.p.) relative to 11 European peer regions that had a similar labour productivity in 2005. In addition, the share of the population in employment grew less in Veneto, reaching a fiv e p.p. gap in 2015 but which has since narrow ed to a two p.p. gap in 2024 . The trends in labour productivity and the employment rate contribute to a GDP per capita growth of only 5.5% between 2005 and 2024, relative to 22% (four times higher) in peer regions. Veneto remains internationally competitive because real wage growth has stalled between 2005 and 2024, compounded by a period of limited investment. The average compensation per employee in Veneto was 28% below peer regions in 2005 and increased to 37% in 2024. In 2023, investments per employee in peer regions were 12% lower in Veneto compared to peer regions, while no investment gap existed in 2005. The gap has partially narrow ed since 2014 when it reached its peak at 45%. To further reduce the investment gap , Veneto may need to review policies to attract FDI, currently below 0.5% of regional GDP, relative to over 1% among some of the peer regions. Ven eto may be well positioned to boost FDI attraction given its network of universities, high quality infrastructure, and competitive unit labour costs.

0.5% of regional GDP, relative to over 1% among some of the peer regions. Ven eto may be well positioned to boost FDI attraction given its network of universities, high quality infrastructure, and competitive unit labour costs. Veneto is a large industrial region in north east Italy. Veneto is one of 21 Italian large (TL2) regions, with a population of 4.9 million in 2025, 8.1% of the total Italian population.1 On an international purchasing power parity (PPP) adjusted GDP per capita basis in 2023, Veneto rank ed 49th of 199 TL2 regions of European OECD members or European OECD candidate countries with available data. It also ranks 99th among all 372 OECD TL2 regions with available data. Veneto contributes around 9 .5% of Italy’s GDP in 2023 and is one of the EU’s most industrialised regions with manufacturing accounting for about 25% of regional employment , specialising in agri-food processing, textiles, machinery and fashion. Economic activity is spread across five intermediate sized cities (Treviso, Vicenza, Padua, Verona, Venice), whose 1 Preserving competitiveness by reviving productivity growth 9

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functional urban area (FUA) populations range between 200 000-500 000. Econo mic policy is mainly set at the regional level (Box 1).2 Box 1. The Veneto Region: Governance and economic context The Veneto Region operates within Italy’s decentralised institutional framewor k, where regions hold significant responsibilities for local economic development, vocational training , innovation support and infrastructure planning. Within this system, regional authorities play a central rol e in designing place-based policies that complement national strategies, particularly in areas such as skills development, support to small and medium-sized enterprises and the management of European Union structural funds. Since the Italian “economic boom” of the 1960s, the region developed around a dense network of

place-based policies that complement national strategies, particularly in areas such as skills development, support to small and medium-sized enterprises and the management of European Union structural funds. Since the Italian “economic boom” of the 1960s, the region developed around a dense network of specialised clusters of small and medium-sized firms (industrial districts), often family-owned, with deep local roots and strong links to export markets. This model supported rapid industr ialisation and job creation, making Veneto one of the most manufacturing-intensive regions in Italy. During the early 2000s, Veneto’s firms adapted to globalisation by integrating mo re deeply into global value chains, while often maintaining a small scale. Many companies outsourc ed labour-intensive stages of production to Central and Eastern Europe, while retaining design, co-ordination and highvalue activities locally. This strategy helped firms remain competitive in international markets, but it also increased exposure to external shocks and intensified pressure on domestic productivity and wages. The global financial crisis that started in 2008 marked a turning point. Demand contractions and tighter financial conditions reinforced cost pressures and accelerated restructuring, including further outsourcing and firm exits. While exports later recovered, productivity growth remain ed subdued, reflecting limited firm scaling and investment. In 2017, the Veneto region was hit by a major financial shock when two large local banks – operating as private shareholder companies – collapsed abruptly, inflicting losses on savers, primarily households and small enterprises, equiva lent to approximately 3% of regional GDP. Three years later, the COVID-19 shock disrupted production and supply chains, but the subsequent recovery was characterised by strong dema