Does dependence on internal finance help explain the prevailing pattern of manufacturing? The case of the Italian Mezzogiorno

Domenico Sarno

International Review of Applied Economics, 2015, vol. 29, issue 5, 701-715

Abstract: The purpose of the paper is to ascertain a possible relationship between sectorial financial dependence and the regional industrialization pattern in the backward areas of Southern Italy, the so-called Italian Mezzogiorno. The analysis is based on a definition of financial dependence different to that of Rajan-Zingales in that it is determined as the contribution of internal resources to the financing of firm growth and is measured through the estimation of the LPE standard model augmented by the cash flow variable on a large sample of Italian SMEs observed from 2001-2008. The relationship between sectorial measures of financial dependence and composition of manufacturing in Italian Southern regions is then tested; the analysis shows that firms' shares of the low financial dependence sectors tend to prevail in manufacturing in the Southern regions.

Date: 2015
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DOI: 10.1080/02692171.2015.1054370

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