This paper aims to show how a region’s constant level of social capital may have a very different impact on its economic growth depending on whether the central or the local level of government is responsible for regional policy. Our case study is the economic performance of Northern and Southern Italy in the post-World War II period, when a long phase of regional convergence came to a sudden halt in the early 1970s. We focus on the economic effects of the 1970s institutional reforms on government decentralization and wage bargaining. Our main hypothesis is that decentralization allocates the provision of public capital to institutions, the local ones, more exposed to a territory’s social capital. Since social capital is lower in the Southern regions, decentralization made their developmental policies less effective from 1970 onwards, and regional inequality increased. We build an endogenous growth model augmented to include the interaction between social capital and public investment as well as the reform of the Italian labour market. We calibrate our model using data of the Italian regions for 1951–71. Our quantitative results indicate that decentralization triggered the influence of local social capital on growth and played a central role in halting the convergence path of the low-social-capital regions.

Decentralization, social capital, and regional growth: The case of the Italian North-South divide

Mauro L.
Membro del Collaboration Group
;
Carmeci G.
Membro del Collaboration Group
2023-01-01

Abstract

This paper aims to show how a region’s constant level of social capital may have a very different impact on its economic growth depending on whether the central or the local level of government is responsible for regional policy. Our case study is the economic performance of Northern and Southern Italy in the post-World War II period, when a long phase of regional convergence came to a sudden halt in the early 1970s. We focus on the economic effects of the 1970s institutional reforms on government decentralization and wage bargaining. Our main hypothesis is that decentralization allocates the provision of public capital to institutions, the local ones, more exposed to a territory’s social capital. Since social capital is lower in the Southern regions, decentralization made their developmental policies less effective from 1970 onwards, and regional inequality increased. We build an endogenous growth model augmented to include the interaction between social capital and public investment as well as the reform of the Italian labour market. We calibrate our model using data of the Italian regions for 1951–71. Our quantitative results indicate that decentralization triggered the influence of local social capital on growth and played a central role in halting the convergence path of the low-social-capital regions.
2023
4-feb-2023
Pubblicato
https://doi.org/10.1016/j.ejpoleco.2023.102363
File in questo prodotto:
File Dimensione Formato  
1-s2.0-S0176268023000071-main.pdf

accesso aperto

Tipologia: Documento in Versione Editoriale
Licenza: Creative commons
Dimensione 2.15 MB
Formato Adobe PDF
2.15 MB Adobe PDF Visualizza/Apri
Pubblicazioni consigliate

I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.

Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11368/3048878
Citazioni
  • ???jsp.display-item.citation.pmc??? ND
  • Scopus 3
  • ???jsp.display-item.citation.isi??? 3
social impact