Italian Regional Dualism

A peculiar feature of studies analysing the relationship between infrastructures endowment and economic development that has not been well analysed is represented by parameter heterogeneity: the effect of public investment differs across countries, regions, and sectors. This study aims to investigate the heterogeneity across Italian regions basing the analysis also on institutional and political grounds. For the best of my knowledge, this is the first work utilising a novel alternative objective measure of corruption that consists in the difference between a measure of the physical quantities of public infrastructure and the cumulative price government pays for public capital stocks since its proposition in 2005. The empirical analysis confirms the existence of parameters heterogeneity across Italian regions. The empirical evidence is also consistent with theoretical considerations that corruption negatively affects economic performance. Furthermore, the Moran's I test on predicted random effects supports the existence of different geographical patterns regarding both the economic impact of infrastructures and the effects of corruption.