Veneto is a region of 4.9 million inhabitants (8.1% of the Italian population) that produces 9.5% of Italian GDP. It is one of European industrial powerhouses, with manufacturing accounting for over one third of regional gross value added.
Over the last two decades, Veneto has been consistently more competitive than comparable European regions, thanks to a combination of high labour productivity and relatively moderate labour costs. However, the productivity component of this advantage has steadily weakened: by 2024, Veneto’s labour productivity had accumulated a gap of 12 percentage points (p.p.) relative to 11 European peer regions that had similar productivity levels in 2005. While the trend is shared with other Italian industrial regions, some of the challenges are specific to Veneto and demand tailored policies.
With stalling productivity, competitiveness increasingly depended on wage moderation. Yet, in a context of increasing labour shortages and competition for talents, boosting productivity should become a priority to allow salaries to increase, especially in the manufacturing sector, which still represent the backbone of the regional economy.
National and regional policy makers can strengthen Veneto’s productivity and competitiveness by adopting an integrated FDI attraction strategy, promoting the integration of manufacturing with advanced services, fostering the diffusion of knowledge from research to firms, and improving formal recruitment channels to better match high‑skilled workers with the firms that need them.
Can productivity secure Veneto's competitive future?
Between 2005 and 2024, Veneto’s labour productivity fell behind by 12 percentage points (p.p.) relative to 11 European peer regions that had a similar level of labour productivity in 2005 (Figure 1 Panel A). 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. Veneto’s lacklustre productivity growth trend is shared with other industrial Italian regions.
The labour productivity gap is partially due to an investment gap, which however has been narrowing significantly since its peak in 2014. In 2023, investments per employee were 12% lower in Veneto compared to peer regions, while no investment gap existed in 2005. The gap had reached its highest level in 2014, when investment per employee in Veneto was 45% lower than in comparable regions. Total annual foreign direct investments (FDI) into the region are low relative to most peer regions at less than 0.5% of regional GDP, where some peer regions reach levels of over 1% of regional GDP.
Veneto has a diversified economy characterised by a strong manufacturing base, but it lacks productivity champions. While manufacturing is more important in the regional economy than in most peer regions, all peer regions had higher productivity level in manufacturing in 2022 and all of them saw manufacturing productivity grow more than Veneto since 2005. Both 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 productivity champions partially reflects the scarcity of very large firms. In Veneto, 15% of the manufacturing workforce are employed by large firms, compared to 37-63% in the countries of the peer regions, and compared to 29% for Italy overall.
Veneto’s labour market is in good health, but the education and skill level is lower than in peer regions. The employment and unemployment rates in Veneto outperform the Italian national average and are on par with many of its peer regions. However, the composition of the workforce is substantially different from peers. The share of tertiary educated workers in Veneto was 20% in 2023, more than 20 percentage points below that of peer regions (Figure 1 Panel C). One in three workers indicated that they do not work with any digital devices, compared with one in five among peer regions. In manufacturing, less than 10% of workers are employed in R&D, ICT and marketing occupations, compared to above 20% in peer regions.
There are many students in science, technology and mathematics (STEM) subjects in Veneto, but only one in five STEM-educated workers has a STEM-related job. Veneto has more students enrolled in STEM university degrees as a proportion of the student-age population than many peers (Figure 1 Panel D). However, the region has the third lowest share of STEM-educated workers in STEM-related jobs, pointing to a potential skill mismatch. Informal recruitment channels dominate over formal ones, which may limit opportunities for workers with fewer connections, including those coming from outside the region.
Regions with higher productivity tend to have higher household and workers’ incomes and lower risk of people falling into poverty and social exclusion. Productivity growth allows firms to expand and pay higher wages to workers. The income earned in a region also increases the tax revenue of governments, which provide the resources needed for better public services. Across OECD regions, a 10% increase in productivity is associated with 6% higher real income for workers and a 2% lower risk for people to experience poverty and social exclusion (OECD, 2024[1]).
Note: Peer regions are 11 European regions with a similar GDP per capita and population size as Veneto in 2005. The peer regions are Lower Austria (AT), Upper Austria (AT), Flemish Region (BE), Walloon Region (BE), Baden-Württemberg (DE), Hesse (DE), Southern Finland (FI), Auvergne-Rhône-Alpes (FR), Provence-Alpes-Côte d’Azur (FR), Utrecht (NL), and North Holland (NL). Panels A.-C. represent unweighted averages among these regions. Paned D indicates the range across the regions. Emilia-Romagna and Tuscany are two Italian comparison regions.
Source: A. and B. based on European Commission Ardeco. C. and D. based on European Labour Force Survey. (OECD, 2026[2]).
Veneto is one of the leading European manufacturing powerhouses, which is undergoing major transformations with effects on productivity. Veneto is home to 4.9 million people (8.1% of the Italian population) and accounts for 9.5% of Italian GDP. It is relatively intensive in industrial activity, with manufacturing accounting for over 34% of Gross Value Added (GVA) and 25% of employment in 2023. The information and communication sector and professional, technical and administrative services together account for 15% of business GVA, compared to 22% among peer regions. Its development model has undergone significant transformation over the past decades, driven by external pressures such as intensified international competition from Eastern Europe and China, deeper integration into global value chains, and shocks like the global financial crisis.
Despite stalling productivity, Veneto maintains high competitiveness because salaries did not grow in real terms over the same period. The average compensation per employee in Veneto was 28% below peer regions in 2005 and this gap increased to 37% in 2024 (Figure 1 Panel B). In a context of increasing labour market tightness and competition for talents, reviving competitiveness through productivity growth, allowing salaries to align with peers, is a policy priority.
With a large manufacturing sector, a quarter of Veneto’s workforce is vulnerable to the green transition. Transitioning between vulnerable jobs and green-task jobs can be challenging because of different skill requirements. In Veneto, for instance, 91% of them have less than a tertiary degree. Supporting their transition to non-vulnerable jobs require targeted interventions.
Create an integrated policy for attracting foreign direct investments (FDI) aligning multiple policy instruments. These instruments may include infrastructure provision, targeted private sector incentives, investor information services and scouting, and skills development.
Support a manufacturing upgrade, including with the integration of advanced services. Regional policies can provide incentives for manufacturing firms to redefine production processes, introducing organisational innovations and integrating skilled and highly educated workers in advanced support operations. While Veneto’s research ecosystem shows strong capacity for generating knowledge, a key challenge lies in making it an asset for firms, especially SMEs. This would entail improving the accessibility to the research infrastructure managed by its universities, such as supercomputing facilities.
Make skilled workers available and valued by firms. Widespread adoption of open, formal recruitment processes, together with an expansion of local public employment services, help achieve better worker-firm matches. The attraction and retention of qualified workers require a mix of policies encompassing education, housing, childcare support and urban investments.
Offer targeted skills policies to workers most disadvantaged in the green transition or the AI revolution. Policy instruments can include job coaching and retraining. The use of accredited and certified adult learning (including “micro credentials”) by employers may help job-to-job transitions, promoting a culture of continuous learning.
OECD (2025) “From analysis to action: Harnessing local policies to boost productivity”, Conference summary, https://www.oecd.org/en/events/2025/06/from-analysis-to-action-harnessing-local-policies-to-boost-productivity.html
OECD (2024) “Getting the productivity recipe right means regions need their own special policy mix”, OECD Cogito blog, 10 July 2024, https://oecdcogito.blog/2024/07/10/getting-the-productivity-recipe-right-means-regions-need-their-own-special-policy-mix/
References
[2] OECD (2026), “Rebooting Veneto’s competitiveness through productivity growth”, OECD Local Economic and Employment Development (LEED) Papers, No. 2026/10, OECD Publishing, Paris, https://doi.org/10.1787/a4320f5c-en.
[1] OECD (2024), “Bringing Trentino’s productivity growth back on track: A comparison with OECD “peer” regions”, OECD Local Economic and Employment Development (LEED) Papers, No. 2024/03, OECD Publishing, Paris, https://doi.org/10.1787/0e74a691-en.
Contact
Carlo Menon, OECD Trento Centre for local development, Carlo.Menon@oecd.org.