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Regional Infrastructure and Firm Investment. Theory and Empirical Evidence for Italy

Author

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  • Francesco Aiello

    (University of Calabria)

  • Alfonsina Iona

    (Aston University)

  • Leone Leonida

    (Queen Mary, University of London)

Abstract

We model the channels through which public expenditure on infrastructure influences firm value and shapes its investment decisions via both adjustment costs and marginal profitability of capital. We test these hypotheses by using a large panel of Italian firms. Empirical results show that infrastructure interacts with revenues and costs in shaping firm's profitability of capital and influences its adjustment costs. Finally we find that infrastructure expenditure contributes to reduce the economic gap between the North and the South of Italy. These effects vary across regions and sectors.

Suggested Citation

  • Francesco Aiello & Alfonsina Iona & Leone Leonida, 2009. "Regional Infrastructure and Firm Investment. Theory and Empirical Evidence for Italy," Working Papers 639, Queen Mary University of London, School of Economics and Finance.
    • Handle: RePEc:qmw:qmwecw:639
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    Cited by:

    1. Aiello, Francesco & Pupo, Valeria & Ricotta, Fernanda, 2013. "Firm heterogeneity in TFP, sectoral innovation and geography. Evidence from Italy," MPRA Paper 48573, University Library of Munich, Germany.
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    4. Alfonsina Iona, 2019. "Modelling the Relation between Managers, Shadow Cost of External Finance and Corporate Investment," Mathematics, MDPI, vol. 7(11), pages 1-10, November.
    5. Francesco Aiello & Valeria Pupo & Fernanda Ricotta, 2014. "Explaining Total Factor Productivity at Firm Level in Italy: Does Location Matter?," Spatial Economic Analysis, Taylor & Francis Journals, vol. 9(1), pages 51-70, March.

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    More about this item

    Keywords

    Regional infrastructure; Firm's value; Corporate investment;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • D92 - Microeconomics - - Micro-Based Behavioral Economics - - - Intertemporal Firm Choice, Investment, Capacity, and Financing

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