Regional Development and Public Spending The Case of Italy

In Italy redistribution and regional policies have been implemented since World War II; poorer regions have been receiving large amount of public funds, namely public consumption and infrastructure investment, to stimulate economic activity or, more generally, to increase welfare. Starting with this premise, the paper analyses the effects of public spending on regional growth in Italy. Taking advantage of both the spatial and the time dimension of the available data, we offer results of two distinct panel analyses which stress the cross-section or the time dimension, respectively. The main results are the following: there is a positive relationship between regional growth and infrastructure capital which mainly holds for the Manufacturing sector; within the Manufacturing sector, the impact of public investment on productivity is noticeably stronger for the low-income group of regions than for the high- income group of regions. No positive impact of public consumption on productivity is detected.