The Producer Service Sector in Italy: Long-Term Growth and its Local Determinants

60 Pages Posted: 18 Oct 2007

Date Written: September 2007

Abstract

This paper analyzes 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 modeling 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.

Keywords: agglomeration economies, human capital, producer services

JEL Classification: L80, R10, R12

Suggested Citation

Di Giacinto, Valter and Micucci, Giacinto, The Producer Service Sector in Italy: Long-Term Growth and its Local Determinants (September 2007). Bank of Italy Temi di Discussione (Working Paper) No. 643. Available at SSRN: https://ssrn.com/abstract=1022542 or http://dx.doi.org/10.2139/ssrn.1022542

Valter Di Giacinto (Contact Author)

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Giacinto Micucci

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

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