Agglomeration Economies and Employment Growth in Italy
Using local labor systems (LLSs) data, we assess the effect of the local productive structure on employment growth in Italy during the period 1981–2008. Italy represents an interesting case study because of the high degree of spatial heterogeneity in loca
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Agglomeration Economies and Employment Growth in Italy Roberto Basile, Cristiana Donati, and Rosanna Pittiglio Abstract Using local labor systems (LLSs) data, we assess the effect of the local productive structure on employment growth in Italy during the period 1981–2008. Italy represents an interesting case study because of the high degree of spatial heterogeneity in local labor market performances and of the presence of strongly specialized LLSs (industrial districts). Building on semi-parametric geoadditive models, our empirical investigation allows us to identify important nonlinearities in the relationship between local industry structure and local employment growth to assess the relative performance of industrial districts and to control for unobserved spatial heterogeneity. Keywords Employment dynamics • Geoadditive models • Industrial districts • Industry structure • Semi-parametric JEL Classification R11, R12, C14
6.1 Introduction In this chapter, we analyze the effect of industry structure on local employment growth in Italy. The hypotheses put into empirical test concern the role of many factors characterizing the local productive structure: (1) the presence of an industrial district; (2) the level of productive specialization; (3) the degree of sectoral diversification; (4) the population density; (5) the level of local competition; and (6) the average firm size. In this way, we follow the broad literature started by
R. Basile () Department of Economics, Second University of Naples, Corso Gran Priorato di Malta, 1 - 81043, Capua (CE), Italy e-mail: [email protected] C. Donati • R. Pittiglio Second University of Naples, Capua (CE), Italy © Springer-Verlag Berlin Heidelberg 2015 C. Mussida, F. Pastore (eds.), Geographical Labor Market Imbalances, AIEL Series in Labour Economics, DOI 10.1007/978-3-642-55203-8_6
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Glaeser et al. (1992) and Henderson et al. (1995).1 Previous studies carried out for the case of Italy (Mameli et al. 2008; Paci and Usai 2008) report a negative impact of specialization externalities (notwithstanding the strong anecdotal evidence of the economic success of industrial districts, the places where Marshallian externalities are magnified) and a positive effect of diversification on local employment growth. Only Forni and Paba (2002) find a positive impact of both specialization and Jacobs externalities. We claim that the results of previous studies may suffer from a number of model mis-specification issues. First, all of these studies measure Marshallian (or specialization) externalities using location quotients disregarding the fact that higher specialization levels may lead higher vulnerability to idiosyncratic shocks (such as a decline faced by the primary industry of the local area) and, thus, are likely to bolster asymmetric developments and differences in growth rates across local economies, unless some effective “risk sharing” mechanisms help “protect” the local economic environment against idiosyncratic shocks (Basile and Girardi 2010). I
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