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The producer service sector in Italy: Long-term growth and its local determinants

  • Valter Di Giacinto

    ()

    (Bank of Italy, Branch of L'Aquila)

  • Giacinto Micucci

    ()

    (Bank of Italy, Branch of Ancona)

This paper analyses the local determinants of producer service growth in Italy, focusing on agglomeration economies, and taking into account the particular features of this sector with respect to manufacturing. Using an OECD classification, we estimate a dynamic specification allowing for transitory dynamics around the long-run employment path derived from a model in which both demand and supply factors are considered. Compared with the prevailing modelling approach, the spatial scope of externalities is extended to include possible interactions across different urban areas. Our main findings are the following. Long-run employment growth is positively affected by Marshall-Arrow-Romer externalities, with a minor role played by urbanization externalities, a result similar to that obtained by more recent research on the Italian manufacturing sector and its industrial districts. Among the remaining supply factors, human capital exerts a positive influence on the long-run employment level in producer services industry; among demand factors, the size of the local market appears to be important, given the still incomplete tradability of service output. Significant interactions across urban areas are shown to occur; in particular, positive knowledge externalities on local productivity appear to be induced by location in urban areas contiguous to cities specializing in producer services.

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Paper provided by Bank of Italy, Economic Research and International Relations Area in its series Temi di discussione (Economic working papers) with number 643.

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Date of creation: Sep 2007
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Handle: RePEc:bdi:wptemi:td_643_07
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  14. Sharon Kozicki & Peter A. Tinsley, 1998. "Vector rational error correction," Research Working Paper 98-03, Federal Reserve Bank of Kansas City.
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