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Public investment and growth: Lessons learned from 60-years experience in Southern Italy

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  • Papagni, Erasmo
  • Lepore, Amedeo
  • Felice, Emanuele
  • Baraldi, Anna Laura
  • Alfano, Maria Rosaria

Abstract

This article analyses the contribution of public investment to economic growth in Southern Italy in the second half of the twentieth century (1951–2011). The Bai–Perron tests suggest that economic growth followed three distinct regimes: accelerated growth in the years 1951–1973 (average growth rate 5.3%); low growth in the period 1974–1995 (average growth rate 1.6%); zero growth on average after 1995. Using cointegration analysis, we find a positive effect of public investment on per unit of labour output of the Mezzogiorno in the whole period, 1951–2011. However, the estimates of the model show statistically significant parameters of public investment in the first regime, but not in the second regime, when economic growth is sustained by business investment and technical change. The last phase of growth sees the negative influence of the social and institutional environment on the functioning of the economy. The different impact of public investment on growth over time is ascribed to changes in the quality of institutions.

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  • Papagni, Erasmo & Lepore, Amedeo & Felice, Emanuele & Baraldi, Anna Laura & Alfano, Maria Rosaria, 2021. "Public investment and growth: Lessons learned from 60-years experience in Southern Italy," Journal of Policy Modeling, Elsevier, vol. 43(2), pages 376-393.
    • Handle: RePEc:eee:jpolmo:v:43:y:2021:i:2:p:376-393
    DOI: 10.1016/j.jpolmod.2019.12.003
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    5. Mauro, Luciano & Pigliaru, Francesco, 2023. "Italy’s National Recovery and Resilient Plan: Will it Narrow the North-South Productivity Gap?," FEEM Working Papers 338592, Fondazione Eni Enrico Mattei (FEEM).
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    More about this item

    Keywords

    Public investment; Growth instability; Cointegration; Structural breaks; Southern Italy;
    All these keywords.

    JEL classification:

    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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