Fiscal Policy, public investment, and structural change:A P-SVAR analysis on Italian regions

Francesco Zezza and Dario Guarascio

No 226, Working Papers in Public Economics from Department of Economics and Law, Sapienza University of Roma

Abstract: This work analyses the regional impact of public investments focusing on three domains that are key for the Italian National Recovery and Resilience Plan (NRRP): green, digital and education/knowledge. Relying on a unique database ('Conti Pubblici Territoriali'), we perform a P-SVAR model showing that fiscal policy shocks have positive and long-lasting effects on GDP and private investments. A relevant heterogeneity is detected, though. In particular, shocks to digital spending only timidly crowd-in private investment while a stronger effect is found concerning the green sector. Second, public investments have a significant impact on regions' ‘structural upgrading’, i.e., export competitiveness and share of high-tech manufacturing. Third, confirming previous findings, shocks to public spending are found to have larger effects in centre-north regions, in terms of both GDP and private investments. Nevertheless, public spending turns out to have a stronger structural effect in the south than in the centre-north, highlighting the relevant role that the NRRP may play in reducing the Italian north-south divide

Keywords: Fiscal multipliers; Panel SVAR; Italian regions; North-South divide (search for similar items in EconPapers)
JEL-codes: C33 E62 H70 R58 (search for similar items in EconPapers)
Pages: 50
Date: 2022-09
New Economics Papers: this item is included in nep-eur, nep-geo and nep-ure
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Journal Article: Fiscal policy, public investment and structural change: a P-SVAR analysis on Italian regions (2024)
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