Uneven Regional Development in Italy: Explaining Differences in Productivity Levels

Many empirical studies have analysed the convergence of the Italian regions, but no evidence is provided on the causes of differences in productivity levels. Moving from a recent approach focusing on differences in levels across countries, rather than in growth rates (Hall - Jones 1999), the determinants of regional differences in levels of labour productivity and Total Factor Productivity are investigated. Through an evaluation of regional stock of physical and human capital, we carry out the decomposition of the output per worker in the contribution deriving from factor accumulation and from TFP. The paper achieves two relevant results. First, the growth accounting exercise shows that regional disparities in output per worker are mainly due to the differences in TFP, rather than in inputs accumulation. Second, the estimation of an econometric model of the determinants of TFP, in contrast with previous studies, shows the importance of some variables (infrastructures, state intervention, financial system, property rights enforcement) in explaining Italian regional differences.