Many advanced economies have experienced a productivity slowdown in recent years. Italy, however, has been experiencing such a slowdown since the mid-1990s. This column provides a detailed analysis of Italy’s patterns of misallocation over this period. Firms in the Northern regions, as well as large firms, have experienced the sharpest increase in resource misallocation. To tackle the resulting productivity slowdown, reforms need to address unemployment benefits and higher education, as well as encouraging investment in intangible assets.