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Banking structure and regional economic growth: lessons from Italy

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  • Stefano Usai

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  • Marco Vannini

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Abstract

Following the literature on the comparative advantage of small versus large banks at lending to small businesses, and in light of the worldwide decline in the number of intermediaries that specialize in this type of lending associated with deregulation in the banking industry, we examine the role that specific categories of banks have played in the context of Italy's regional economic growth. Over the estimation period, 1970-1993, which ends in the year of full implementation of the banking reform that introduced statutory de-specialization and branching liberalization, Italy featured not only a substantial presence of SME's in the real sector, as is still the case, but also a large and heterogeneous set of credit institutions with different ownership, size and lending styles. Exploiting these peculiarities we study the role of specific intermediaries and gather indirect evidence concerning the likely effects, ceteris paribus, of the current consolidation processes. The main findings, stemming from panel regressions with fixed effects, are as follows. The overall size of the financial sector has a weak impact on growth, but some intermediaries are better than others - Co-operative banks and Special credit institutions play a positive role, Banks of national interest (basically large private banks) and Public law banks (government-owned banks) either do not affect growth or have a negative influence depending on how growth is measured. Co-operative banks were mostly small banks and Special credit institutions were all but large conglomerates with standardized credit policies, hence our results lend support to the current world-wide concerns of a reduction in the availability of credit to SME's resulting from consolidation and regulatory reforms in the banking industry
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  • Stefano Usai & Marco Vannini, 2005. "Banking structure and regional economic growth: lessons from Italy," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 39(4), pages 691-714, December.
  • Handle: RePEc:spr:anresc:v:39:y:2005:i:4:p:691-714
    DOI: 10.1007/s00168-005-0022-x
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    Cited by:

    1. Artelaris, Panagiotis & Arvanitidis, Paschalis & Petrakos, George, 2006. "Theoretical and Methodological Study on Dynamic Growth Regions and Factors Explaining their Growth Performance," Papers DYNREG02, Economic and Social Research Institute (ESRI).
    2. Pietro Alessandrini & Michele Fratianni & Luca Papi & Alberto Zazzaro, 2016. "The asymmetric burden of regulation: will local banks survive?," Mo.Fi.R. Working Papers 125, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.
    3. Swamy, Vighneswara, 2011. "Does Government Intervention in Credit Deployment Cause Inclusive Growth? – An Evidence from Indian Banking," MPRA Paper 48100, University Library of Munich, Germany.
    4. Carole Howorth & Andrea Moro, 2012. "Trustworthiness and interest rates: an empirical study of Italian SMEs," Small Business Economics, Springer, vol. 39(1), pages 161-177, July.
    5. Andrea Vaona, 2005. "Regional Evidence on the Finance-Growth Nexus," Working Papers 30/2005, University of Verona, Department of Economics.
    6. Michal Jurek, 2014. "Role and impact of different types of financial institutions on economic performance and stability of the real sector in selected EU member states," Working papers wpaper36, Financialisation, Economy, Society & Sustainable Development (FESSUD) Project.
    7. Andrea Vaona & Roberto Patuelli, 2008. "New empirical evidence on local financial development and growth," Letters in Spatial and Resource Sciences, Springer, vol. 1(2), pages 147-157, December.
    8. Marco Crocco & Fabiana Santos & Pedro Amaral, 2009. "The spatial structure of the financial development in Brazil," Textos para Discussão Cedeplar-UFMG td361, Cedeplar, Universidade Federal de Minas Gerais.
    9. repec:spr:anresc:v:59:y:2017:i:1:d:10.1007_s00168-017-0814-9 is not listed on IDEAS
    10. BARRA, Cristian & ZOTTI, Roberto, 2018. "Financial Stability as a Public Policy Goal to Increase Local Economic Development: an Empirical Investigation from Italian Labour Market Areas," CELPE Discussion Papers 154, CELPE - Centre of Labour Economics and Economic Policy, University of Salerno, Italy.
    11. Andrea Vaona, 2008. "Regional evidence on financial development, finance term structure and growth," Empirical Economics, Springer, vol. 34(1), pages 185-201, February.
    12. Barbara Pistoresi & Valeria Venturelli, 2012. "Credit, Venture Capital And Regional Economic Growth," Department of Economics 0680, University of Modena and Reggio E., Faculty of Economics "Marco Biagi".
    13. Feiza El Hancha Sfar & Olfa Ben Ouda, 2016. "Contribution of Cooperative Banks to the Regional Economic Growth: Empirical Evidence from France," International Journal of Economics and Financial Issues, Econjournals, vol. 6(2), pages 508-514.
    14. Barbara Pistoresi & Valeria Venturelli, 2015. "Credit, venture capital and regional economic growth," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 39(4), pages 742-761, October.
    15. Aiello, Francesco & Bonanno, Graziella, 2016. "Bank efficiency and local market conditions. Evidence from Italy," Journal of Economics and Business, Elsevier, vol. 83(C), pages 70-90.

    More about this item

    Keywords

    R11; R15; 016;

    JEL classification:

    • R15 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Econometric and Input-Output Models; Other Methods
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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