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Public investment and growth: Lessons learned from 60-years experience in Southern Italy

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  • Papagni, Erasmo
  • Lepore, Amedeo
  • Felice, Emanuele
  • Baraldi, Anna Laura
  • Alfano, Maria Rosaria

Abstract

This article analyses the contribution of public investment to economic growth in Southern Italy in the second half of the twentieth century (1951–2011). The Bai–Perron tests suggest that economic growth followed three distinct regimes: accelerated growth in the years 1951–1973 (average growth rate 5.3%); low growth in the period 1974–1995 (average growth rate 1.6%); zero growth on average after 1995. Using cointegration analysis, we find a positive effect of public investment on per unit of labour output of the Mezzogiorno in the whole period, 1951–2011. However, the estimates of the model show statistically significant parameters of public investment in the first regime, but not in the second regime, when economic growth is sustained by business investment and technical change. The last phase of growth sees the negative influence of the social and institutional environment on the functioning of the economy. The different impact of public investment on growth over time is ascribed to changes in the quality of institutions.

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  • Papagni, Erasmo & Lepore, Amedeo & Felice, Emanuele & Baraldi, Anna Laura & Alfano, Maria Rosaria, 2021. "Public investment and growth: Lessons learned from 60-years experience in Southern Italy," Journal of Policy Modeling, Elsevier, vol. 43(2), pages 376-393.
    • Handle: RePEc:eee:jpolmo:v:43:y:2021:i:2:p:376-393
    DOI: 10.1016/j.jpolmod.2019.12.003
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    2. Finocchiaro Castro, Massimo & Guccio, Calogero & Rizzo, Ilde, 2023. "“One-size-fits-all” public works contract does it better? An assessment of infrastructure provision in Italy," Journal of Policy Modeling, Elsevier, vol. 45(5), pages 994-1014.
    3. Massimo Finocchiaro Castroa & Calogero Guccio & Ilde Rizzo, 2023. "How 'one-size-fits-all' public works contract does it better? An assessment of infrastructure provision in Italy," Papers 2304.10776, arXiv.org.
    4. Tamai, Toshiki, 2023. "The rate of discount on public investments with future bias in an altruistic overlapping generations model," European Journal of Political Economy, Elsevier, vol. 79(C).
    5. Fanti, Lucrezia & Pereira, Marcelo C. & Virgillito, Maria Enrica, 2023. "The North-South divide: Sources of divergence, policies for convergence," Journal of Policy Modeling, Elsevier, vol. 45(2), pages 405-429.
    6. Niittymies, Aleksi & Pajunen, Kalle & Lamberg, Juha-Antti, 2022. "Temporality and firm de-internationalization: Three historical approaches," Journal of World Business, Elsevier, vol. 57(6).
    7. Federico Aresu & Emanuela Marrocu & Raffaele Paci, 2023. "Public capital and institutions' quality in the Italian regions," Journal of Regional Science, Wiley Blackwell, vol. 63(5), pages 1284-1308, November.
    8. Trần Vân Anh, 2022. "State Management of Public Investment for Development: Empirical Study at Thai Binh Province of Vietnam," Journal of Public Administration and Governance, Macrothink Institute, vol. 12(2), pages 2133-2133, December.
    9. Elisabetta Venezia, 2023. "Cost–Benefit Analysis in High-Speed Railway Projects: Appraisal of Methodological Approaches and an Initial Social Equity Evaluation, A Case Study," Sustainability, MDPI, vol. 15(14), pages 1-18, July.
    10. Bação, Pedro & Duarte, Joshua & Simões, Marta, 2024. "Social expenditure composition, inequality and growth in the OECD: Labour market policies are most effective," Journal of Policy Modeling, Elsevier, vol. 46(1), pages 75-89.
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    More about this item

    Keywords

    Public investment; Growth instability; Cointegration; Structural breaks; Southern Italy;
    All these keywords.

    JEL classification:

    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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