Ceris-Cnr, W.P. N° 02/2008 

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

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

Carmelo Petraglia§
University of Napoli “Federico II”, Department of Economics

  

February 2008

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

JEL-codes: C44, D21, D24, O14, O20, R0

 

* An earlier version of this paper was presented at the 10th European Workshop on Efficiency and Productivity Analysis (Lille, 27-30 June 2007). We thank the participants to the parallel session “Exploring Sources of Manufacturing Efficiency and Productivity” for useful comments. We are also very grateful to Graziano Abrate, Giovanni Fraquelli and Adriano Giannola for their helpful comments. The usual disclaimer applies.

 

§ Corresponding author: Dipartimento di Economia, Università degli Studi di Napoli “Federico II”, Complesso Universitario di Monte Sant’Angelo, Via Cinthia, Napoli, 80126, Italy; email: carmelo.petraglia@unina.it

 

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