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Public capital and institutions' quality in the Italian regions

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  • F. Aresu
  • E. Marrocu
  • R. Paci
Abstract
This paper investigates the role played by public capital on the production level of Italian regions by specifically accounting for the quality of institutions. Our analysis, carried out over the period 2000-2019, benefits from the use of a rich dataset on public expenditures which allows us to build the regional series of public capital stock by distinguishing among public institutions in charge of the investments and sectors of intervention. While controlling for several contextual variables (human capital, social capital, technological capital, population density), main results show that public capital has a positive and significant effect on production. Most interestingly, looking at the Mezzogiorno s regions, public capital carried out by local institutions turns out to have a lower impact than in the rest of the Italian regions. On the other hand, central bodies in the South exhibit an impact higher than the average. Moreover, institutions quality exhibits a positive and significant effect on regional economic performance. These results cast serious doubts about the actual capacity of the local Southern administrations to effectively manage the enormous resources of the National Recovery and Resilience Plan and of the new European Union cohesion framework 2021-2027. Our results are also relevant for other European regions that, featuring structural traits similar to Southern Italian regions, are expected to face the same difficulties in managing public funding.

Suggested Citation

  • F. Aresu & E. Marrocu & R. Paci, 2022. "Public capital and institutions' quality in the Italian regions," Working Paper CRENoS 202202, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
    • Handle: RePEc:cns:cnscwp:202202
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    1. Mauro, Luciano & Pigliaru, Francesco & Carmeci, Gaetano, 2023. "Decentralization, social capital, and regional growth: The case of the Italian North-South divide," European Journal of Political Economy, Elsevier, vol. 78(C).

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    Keywords

    Public capital stock; Productivity; Italian regions; Institutions' Quality;
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