Elsevier

Journal of Policy Modeling

Volume 34, Issue 3, May–June 2012, Pages 403-418
Journal of Policy Modeling

Structural funds and the economic divide in Italy

https://doi.org/10.1016/j.jpolmod.2011.10.006Get rights and content

Abstract

This paper provides a contribution to the debate on the role of European Union cohesion policy in Italy. The focus is on the territorial effects of European structural funds from 1996 to 2007. The empirical analysis considers a neoclassical growth model which is augmented by the structural funds spent by each region. Using panel data and a dynamic panel estimator we find that, even though structural funds have had a greater impact in the South compared to the Centre-North of the country, they have not contributed to reducing the productivity divide in Italy.

Introduction

The purpose of this paper is to provide evidence of the role of EU structural interventions in enhancing economic growth and reducing regional disparities in Italy. In particular, the article focuses on the territorial effects of European Union spending in Italy from 1996 to 2007. This type of evaluation is crucial for Italy, in that the presence of a substantial economic divide is a phenomenon that has characterised the country's economic model for decades [see, among many others, Di Liberto, Pigliaru, and Mura (2007) and Mauro (2004)].

An indication of the persistence of these economic discrepancies in Italy can be obtained by comparing the regional GDP per-capita for the years 1980–1981 and 2006–2007 (ISTAT, 2005, ISTAT, 2008). It can be seen that, over the last 25 years, there has been no variation in the distribution of regional GDP per-capita: the regions in which GDP per-capita was below the national average at the beginning occupy the same positions at the end of the period (the correlation between the series of regional GDP per-capita at the beginning and end of the period is 0.95). This persistence in the economic divide is also observable when different time periods are considered. For instance, when considering the years 1996–2007, which are chosen here to evaluate the role of structural funds, it emerges that the income discrepancy was still very large at the end of the period: in 2006–2007 the income of an inhabitant of the richest region (Valle d’Aosta) was, on average, 2.6 times higher than that of an inhabitant of the poorest region (Calabria). In 1996–1997 GDP per-capita in Valle d’Aosta was 2.4 times higher than the GDP per-capita in Calabria.

The persistence of such a divide, despite the amount of EU resources sent to the underdeveloped areas of the country, makes the question of the effectiveness of these policies more important. Evaluation of the effects of the cohesion policy is a particularly relevant issue if one thinks that structural funds represent a significant quota of public transfer payments made in favour of Southern Italian regions.

In this work, an empirical analysis for the period 1996–2007 is carried out by estimating a panel data growth model in which the dependent variable is the annual growth rate of GDP per-capita, or of labour productivity, and structural funds are used as a further explanatory variable of the convergence equation. In the empirical section, the dynamic growth model has been estimated by using the Kiviet and the GMM-SYS estimators which allow us to account for non-observable regional heterogeneity, the small-sample bias and possible endogeneity of regressors (including structural funds). With respect to the related literature that has evaluated the role of structural funds in Italy (Coppola and Destefanis, 2007, Loddo, 2006, Percoco, 2005), we focus on the territorial effects of EU cohesion policy and find that EU funds, albeit they have had a greater impact in the South compared to the Centre-North, have not contributed to a reduction in the economic divide in Italy.

The work is organised as follows. Section 2 briefly reviews the related literature. Section 3 proposes an analysis of the territorial distribution of structural funds. Section 4 evaluates the results of the structural policies on the convergence process across Italian regions. Section 5 identifies some elements influencing the growth impact of EU cohesion policy in Italy. These are followed by some concluding considerations.

Section snippets

The impact of structural funds: a brief literature overview

Although much literature has analysed the regional economic divide, there are few empirical verifications of the impact of structural funds on convergence processes. In practice, two approaches are used. The first one is aimed at estimating the impact of the structural funds by using models based on labour demand and aggregate production functions (De la Fuente, 2002, Percoco, 2005). These models allow analysts to retrieve an indirect impact produced by the European regional policies on the

Structural funds in Italy

A useful indicator for appraising the intensity of state intervention aimed at fostering economic growth is the capital account public expenditure (investment expenditure and capital account transfers) which represents a relevant component of productive capital and, therefore, constitutes a key element for Italian regional growth.1

The distribution of investments by geographical area is consistent with

The empirical framework

The previous section indicates that EU programmes have been a meaningful source of financing for regional policies activated in Italy over the last 20 years. In this respect it is to be expected that EU aid will exert a significant growth effect across Italian regions.

From an analytical point of view, the main approach adopted in order to study the reduction of regional discrepancies has been the analysis of convergence, according to which the income of the poorest regions converges, in the

Understanding the effectiveness of structural funds in Italy

The econometric results indicate no clear evidence that SF have contributed to reducing the productivity divide in Italy. While it is not easy to be conclusive in evaluating this result as a failure or a success (the counterfactual scenario of what would have occurred in the absence of intervention is not observable), several factors may be discussed here in order to better understand the funds’ performance. Before doing this, it is worth highlighting two aspects. First of all, the preceding

Concluding remarks and policy implications

The aim of this paper is to assess the growth effect of European structural funds at regional level in Italy. By adopting a panel-data specification, the estimated conditional convergence is derived from a neoclassical model where structural funds are an augmenting variable of the growth equation. Estimations refer to the period 1996–2007 and have been made using annual data and an error correction model.

As far as the GDP per-capita convergence is concerned, the impact of EU support is found to

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