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Local Government and Innovation: the case of Italian provinces

Fortuna Casoria (), Marianna Marino (), Pierpaolo Parrotta () and Davide Sala ()
Additional contact information
Davide Sala: University of Passau, 94030 Passau, Germany

No 1923, Working Papers from Groupe d'Analyse et de Théorie Economique Lyon St-Étienne (GATE Lyon St-Étienne), Université de Lyon

Abstract: This paper evaluates the effect of decentralization on innovation at the provincial level in Italy. We exploit quasi-natural experiments associated with three waves of reforms occurred in 1992, 2001 and 2004, to establish 8, 4, and 3 new provinces, respectively. Using a difference-in-difference estimation approach, we find evidence of a significant detrimental effect of (further) decentralization on innovation for Northern and Central Italian provinces. We suggest a potential mechanism that may explain the reduction in innovation associated with the aforementioned reforms. We argue that this finding can be rationalized with the costs imposed by the \mafia transplantation" phenomenon, as we find that the new provinces that were more exposed to \mafiosi in confino" reduced their innovation output more extensively. We perform a number of robustness checks that corroborate our main findings.

Keywords: local government; decentralization; innovation; mafia transplantation; difference-in-difference (search for similar items in EconPapers)
JEL-codes: D72 H72 K42 O31 (search for similar items in EconPapers)
Date: 2019
New Economics Papers: this item is included in nep-eur, nep-law, nep-ore and nep-ure
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