The Effects of Public Capital on the Productivity of the Italian Regions

23 Pages Posted: 30 Apr 2007  

Emanuela Marrocu

Universita di Cagliari - Centre for North South Economic Research (CRENOS)

Raffaele Paci

University of Cagliari - Centre for North South Economic Research (CRENOS)

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Date Written: April 2007

Abstract

This paper investigates on the role played by public capital in increasing the productivity levels in Italy. For the construction of the regional series for the public capital stock over the period 1996-2003, the study benefits from the use of the rich dataset on public expenditure, recently published by the Italian Ministry of Economy. We have estimated panel production functions with the inclusion of traditional factors and also intangible inputs like R&D expenditure, human capital and social capital. The results point out that public capital has a positive and significant effect on production. Moreover, the effects of all production factors vary considerably between the two macro-areas of the country, namely Centre-North and Mezzogiorno. More specifically, while private capital is more effective in the South, labour and public capital exhibits an elasticity much higher in the Centre-North with respect to the Mezzogiorno. The disaggregation of the public capital stock into functional categories indicates a significant different impact in the two macro-areas. In addition, when the analysis is carried out by distinguishing among government levels it turns out that the decentralized administrative bodies are much less efficient in the South in delivering public expenditure.

Keywords: public capital, production function, regional disparities, Italy

JEL Classification: D24, H54, O47, R11, C23

Suggested Citation

Marrocu, Emanuela and Paci, Raffaele, The Effects of Public Capital on the Productivity of the Italian Regions (April 2007). Available at SSRN: https://ssrn.com/abstract=982865 or http://dx.doi.org/10.2139/ssrn.982865

Emanuela Marrocu

Universita di Cagliari - Centre for North South Economic Research (CRENOS) ( email )

V. S. Ignazio 78
Cagliari, 09124
ITALY
+39.0706753764 (Phone)
+30.0706753760 (Fax)

Raffaele Paci (Contact Author)

University of Cagliari - Centre for North South Economic Research (CRENOS) ( email )

Viale S. Ignazio, 78
Cagliari I-09123
Italy
+70-6753764 (Phone)
+70-6753760 (Fax)

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