Drivers of regional efficiency differentials in Italy: technical inefficiency or allocative distortions?

Fabrizio Erbetta () and Carmelo Petraglia ()
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Fabrizio Erbetta: University of Piemonte Orientale, Faculty of Economics / HERMES, Higher Education and Research on Mobility and the Economics of Public Services / CERIS-CNR, Institute for Economic Research on Firms and Growth

CERIS Working Paper from Institute for Economic Research on Firms and Growth - Moncalieri (TO)

Abstract: This paper estimates regional economic efficiency differentials at the firm level in the Italian manufacturing sector over the period 1998-2003. We implement an input distance function approach providing measures of both technical inefficiency and allocative distortions in the choice of input mixes. Our results confirm the substantial technical efficiency gap suffered by firms located in Southern regions, thus providing empirical support to the “structural and technological gap” interpretation of the Italian dualism. On the other hand, allocative distortions in the use of inputs show less remarkable regional differences. As for policy implications, our results suggest the need for a re-allocation of public resources for development policies from business incentives measures towards public investments.

Keywords: Technical and allocative efficiency; Input distance function; Development policies (search for similar items in EconPapers)
JEL-codes: C44 D21 D24 O14 O20 R0 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eff and nep-geo
Date: 2008-06
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