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Regional Heterogeneity in Firm Dynamics: The Case of Italy

Author

Listed:
  • Filippo Scoccianti

    (Bank of Italy)

  • Enrico Sette

    (Bank of Italy)

Abstract

We document how firm dynamics differ for firms located in the South versus the Center-North of Italy, using the universe of private sector firms with at least one employee over the last three decades. Controlling for industry fixed-effects, we find that in both areas of the country firms’ age and size negatively correlate with their growth, but this negative correlation is much stronger in the South. Also, Southern firms show markedly higher unconditional entry and exit rates, but the decrease in the exit rates of larger and older firms is stronger in the South than in the rest of the country, a fact that suggests a lower level of selection faced by incumbent firms in Southern regions. These empirical facts point to structural differences in the selection and growth dynamics of Southern firms with respect to the rest of the country that go beyond different sectoral specializations, and call for decisive reforms to the institutional environment—judicial and bureaucratic—as well as for the need of a significant increase in human capital.

Suggested Citation

  • Filippo Scoccianti & Enrico Sette, 2024. "Regional Heterogeneity in Firm Dynamics: The Case of Italy," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 10(3), pages 977-992, November.
    • Handle: RePEc:spr:italej:v:10:y:2024:i:3:d:10.1007_s40797-024-00278-2
    DOI: 10.1007/s40797-024-00278-2
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    More about this item

    Keywords

    Firm dynamics; North–South divide; Entry and exit; Growth;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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