Local financial development, socio-institutional environment, and firm productivity: Evidence from Italy

Luigi Moretti

European Journal of Political Economy, 2014, vol. 35, issue C, 38-51

Abstract: This paper uses the case of Italy to investigate the effects of local financial and socio-institutional development on productivity. The analysis employs firm-level productivity data and exploits variations in banking sector development, judicial enforcement, and social capital across Italian provinces. After controlling for potential endogeneity, our empirical results suggest that the real effects of financial development are conditional on the quality of the socio-institutional environment. In particular, we find that the positive effects of greater financial depth on productivity are stronger when the socio-institutional environment is sufficiently developed. Therefore, to exploit potential productivity gains stimulated by financial development, it is necessary to achieve a higher-quality socio-institutional environment, including reducing the duration of civil trials.

Keywords: Finance–growth nexus; Social capital; Judicial enforcement; Firm labor productivity (search for similar items in EconPapers)
JEL-codes: D2 G2 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (17)

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Related works:
Working Paper: Local financial development, socio-institutional environment, and firm productivity: Evidence from Italy (2014)
Working Paper: Local Financial Development, Socio-Institutional Environment, and Firm Productivity: Evidence from Italy (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:poleco:v:35:y:2014:i:c:p:38-51

DOI: 10.1016/j.ejpoleco.2014.03.006

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