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Happy 150th Birthday Italy? Institutions and Economic Performance Since 1861

  • Paolo Di Martino

    ()

  • Michelangelo Vasta

    ()

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    In the last twenty years the Italian economy showed claer signs of structural crisis. Using a variety of secondary literature, this paper claims that the recent decline must be seen as part of a long-term trend of sub-optimal performance driven by the inability of the country to remain congruent with the tecnological frontier. This problem, in turn, is the result of week and/or poorely-enforced rules that regulate economic activity. Specifically, legal institutions in areas such as firms’ governance (bankruptcy law; balance sheets regulation, use of inefficient forms of governance), banking supervision, education, and tax compliance, favoured “extractive” behaviour from firms’ owners, discouraged businesses to reach a size compatible with innovation in advanced sectors, and frustrated investment in education, research, and innovation. The paper also analyses the origin of this institutional failure and uses the example of football to show the persistency of inefficient rules. The picture that emerges is that institutional failure finds its origin in the feature of the process of State formation and, later, in the post WWII political equilibrium. Distorted institutions serve the interests of a constantly-changing minority, big enough to protect the status quo

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    File URL: http://www.econ-pol.unisi.it/quaderni/662.pdf
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    Paper provided by Department of Economics, University of Siena in its series Department of Economics University of Siena with number 662.

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    Date of creation: Nov 2012
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    Handle: RePEc:usi:wpaper:662
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    1. Pier Angelo Toninelli & Michelangelo Vasta, 2014. "Opening the black box of entrepreneurship: The Italian case in a historical perspective," Business History, Taylor & Francis Journals, vol. 56(2), pages 161-186, March.
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    6. Richard R. Nelson, 2006. "What Makes an Economy Productive and Progressive? What Are the Needed Institutions?," LEM Papers Series 2006/24, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
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    19. Oriana Bandiera, 2003. "Land Reform, the Market for Protection, and the Origins of the Sicilian Mafia: Theory and Evidence," Journal of Law, Economics and Organization, Oxford University Press, vol. 19(1), pages 218-244, April.
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