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The effects of public capital on the productivity of the Italian regions

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  • E. Marrocu
  • R. Paci

Abstract

This paper investigates on the role played by public capital in increasing the productivity levels in Italy. For the construction of the regional series for the public capital stock over the period 1996-2003, the study benefits from the use of the rich dataset on public expenditure, recently published by the Italian Ministry of Economy. We have estimated panel production functions with the inclusion of traditional factors and also intangible inputs like R&D expenditure, human capital and social capital. The results point out that public capital has a positive and significant effect on production. Moreover, the effects of all production factors vary considerably between the two macro-areas of the country, namely Centre-North and Mezzogiorno. More specifically, while private capital is more effective in the South, labour and public capital exhibits an elasticity much higher in the Centre-North with respect to the Mezzogiorno. The disaggregation of the public capital stock into economic categories indicates a significant different impact in the two macro-areas. When the analysis is carried out by distinguishing among government levels it turns out that the decentralized administrative bodies are much less efficient in the South in delivering public expenditure.

Suggested Citation

  • E. Marrocu & R. Paci, 2006. "The effects of public capital on the productivity of the Italian regions," Working Paper CRENoS 200613, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
    • Handle: RePEc:cns:cnscwp:200613
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    More about this item

    Keywords

    public capital; production function; regional disparities; italy;
    All these keywords.

    JEL classification:

    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • 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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