Explaining TFP at firm level in Italy. Does location matter?

Aiello, Francesco and Pupo, Valeria and Ricotta, Fernanda (2011): Explaining TFP at firm level in Italy. Does location matter?

Abstract

This study analyses how firms' internal variables and regional factors affect Total Factor Productivity (TFP) of Italian manufacturing firms. Due to the hierarchical structure of our data, we employ a multilevel model that allows for a clear distinction between firm and region-specific effects. Results refer to 2004-2006 and show, as expected, the importance of firm-specific determinants of TFP. At the same time, they indicate that location matters, in the sense that the context where firms operate plays a crucial role in determining the level of TFP. In more detail, we find that the regional endowment of infrastructure, the efficiency of local administration and the investments in R&D exert a positive effect on firms' performance. We also argue that regional gaps in the endowment of these factors help to understand the dualistic nature of the Italian economy, where a wealthy North coexists with a less developed South.

• Item Type: MPRA Paper
• Language: English
• Keywords: Manufacturing Firms; Total Factor Productivity, Italian Regional Divide; Multilevel Models
• Subjects: R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R1 - General Regional Economics > R11 - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O14 - Industrialization ; Manufacturing and Service Industries ; Choice of Technology; L - Industrial Organization > L6 - Industry Studies: Manufacturing > L60 - General

References

Aiello F., Scoppa V. (2000), Uneven regional development in Italy: explaining differences in productivity levels, Giornale degli Economisti, 60, 270–298.

Aiello F., Iona A., Leone L. (2010), Regional Infrastructure and Firm Investment. Theory and Empirical Evidence for Italy, Empirical Economics, DOI 10.1007/s00181-010-0445-9.

Aiello F., Pupo V. (2011), Structural Funds and the Economic Divide in Italy”, Journal of Policy Modeling (2011), doi:10.1016/j.jpolmod.2011.10.006.

Aiello F., Pupo V., Ricotta F. (2012), A territorial analysis of TFP in Italy”, Scienze Regionali - Italian Journal of Regional Science, 11, 2, (in press).

Ascari G., Di Cosmo V. (2005), Determinants of total factor productivity in the Italian regions, Scienze Regionali – Italian Journal of Regional Science 4, 27–49.

Bank of Italy (2009), Rapporto sulle tendenze nel sistema produttivo italiano, Questioni di Economia e Finanza, n. 45.

Benfratello L., Razzolini T. (2008), Firms’ productivity and internationalisation choices: evidence for a large sample of manufacturing firms in Multinationals and local competitiveness, Lucia Piscitello and Grazia Santangelo (Eds.), Franco Angeli

Bickel R. (2007), Multilevel Analysis for Applied Research, It’s Just Regression!, The Guilford Press, New York.

Brandolini A., Cipollone P. (2001), Multifactor productivity and Labour Quality in Italy, 1981-2000, in Temi di Discussione, n. 422, Bank of Italy.

Byrne J. P., Fazio G., Piacentino D. (2009), Total Factor Productivity convergence among Italian Regions: Some evidence from panel unit root tests, Regional Studies, 43,1, 63-76.

Camagni R. (1991), Innovation Networks: Spatial Pespectives (eds), Belhaven Press, London.

Cannari L., Magnani M., Pellegrini G. (2009) Quali Politiche per il Sud?, in Mezzogiorno e Politiche regionali, pp.673-733, Bank of Italy, Rome.

Carey J.P.C, Galbraith C. A. (1955), The South of Italy and the Cassa per il Mezzogiorno, Political Research Quarterly, 8, 569-588.

Castellani, D. (2002), Export behaviour and productivity growth: evidence from Italian manufacturing firms, Weltwirtschaftliches Archiv, 138, 605–28.

Ciccone A., Hall R.E. (1993), Productivity and the Density of Economic Activity, American Economic Review, 86, 54-70.

Daveri F., Jona Lasinio C. (2005), Italy’s decline: getting the facts right, in “Giornale degli Economisti e Annali di Economia”, 64, 4, 365-410.

Destefanis S., Sena V. (2005), Public capital and total factor productivity: New evidence from the Italian regions, 1970-98, Regional Studies, 39, 5, 603-617.

Di Giacinto V., Nuzzo G. (2006), Explaining labour productivity differentials across Italian regions: the role of socio-economic structure and factor endowments, Papers in Regional Science, 85, 2, 299-320.

Fazio G., Piacentino D. (2010), A Spatial Multilevel Analysis of Italian SMEs' Productivity, Spatial Economic Analysis, 5, 3, 299-316.

Golden M., Picci L. (2005) Proposal for a New Measure of Corruption, Illustrated with Italian Data, Economics & Politics, 17, 37 – 75.

Goldstein H. (2003), Multilevel Statistical Models, London, Arnold.

Griliches, Z. (2000), R&D, Education and Productivity A Retrospective. Harvard University Press, Cambridge, Massachusetts.

ISGEP, International Study Group on Exports and Productivity (2008), Understanding Cross-Country Differences in Exporter Premia: Comparable Evidence for 14 Countries, Review of World Economics, 144, 4, 596 – 635.

ISTAT (2007), Misure di produttività, in Statistiche in breve, October 5, Rome.

ISTAT (2010), Conti Economici Regionali, 1995-2009, Rome.

Iuzzolino G., Pellegrini G. Viesti G. (2011), Convergence among Italian Regions, 1861-2011, Bank of Italy, Economic History Working Papers, n. 22.

Krueger A.B., Lindahl M. (2001), Education for Growth; Why and for Whom? Journal of Economic Literature, 39, 4, 1101-1136.

Krugman P. (1991), Geography and Trade, Cambridge University Press.

Ladu M. G. (2010), Total factor productivity estimates: some evidence from European regions, WIFO Working Papers, 380.

Levinsohn J., Petrin, A. (2003), Estimating production functions using inputs to control for unobservables, Review of Economic Studies, 7, 317-341.

Luke A. (2004), Multilevel Modelling. London: Sage Publications.

Marrocu E., Paci R. (2010), The effects of public capital on the productivity of Italian regions, Applied Economics, 42, 989-1002.

Melitz M. J. (2003), The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity. Econometrica 71, 6, 1695–1725.

OECD (2007), Economic Survey: Italy, OECD, Parigi.

Onida F. (2004), Se il piccolo non cresce. Piccole e medie imprese in affanno, Il Mulino, Bologna.

Parisi M. L., Schiantarelli F., Sembenelli A. (2006), Productivity, Innovation and R&D: Micro Evidence for Italy, European Economic Review, 50, 8, 2037-2061.

Piacentino D. (2008), Productivity, Infrastructures and Convergence: Panel Data Evidence on Italian Regions, Scienze-Regionali/Italian-Journal-of-Regional-Science, 7, 2, 5-26.

Quatraro F. (2006), Technological change and productivity growth in Italian regions, 1982-2001, Région et Développement, n.24.

Rabe-Hesketh S., Skrondal A. (2008), Multilevel and Longitudinal Modeling Using Stata. Stata Press, 2nd edition.

Raspe O., van Oort F. (2011), Firm heterogeneity, productivity and spatially bounded knowledge externalities, Socio-Economic Planning Sciences, 45, 38-47.

Serti F., Tomasi C. (2008), Self-Selection and Post-Entry Effects of Exports: Evidence from Italian Manufacturing Firms, Review of World Economics, 144, 4, 660 – 694.

Sveikauskas L. (2007), R&D and Productivity Growth: a Review of the Literature, US Bureau of Labour Statistics, BLS Working Papers n. 208.

Tabellini G. (2010), Culture and Institutions: Economic Development in the Regions of Europe, Journal of the European Economic Association, 8, 4, 677-716.

UniCredit-Capitalia (2008), Decima indagine sulle imprese manifatturiere italiane. Rapporto Corporate, n.1.

Van Ark B., O’Mahony M., Ypma G. (2007), Productivity in the European Union: A comparative Industry Approach, in “The EU KLEMS Productivity Report”, n. 1.