What drives economic specialization in Italian Regions?

It is well-known that Italy has two distinguishing characteristics closely intertwined with each other and unusual for an advanced country: a persisting specialization in traditional industries and deep internal disparities. The Italian "anomaly" is rooted in the predominance of clusters of small firms producing and exporting low-skilled labour-intensive goods. Some authors have suggested that marked regional variations in manufacturing structures underpin Italy’s perpetual North-South divide, with northern regions more oriented to capital (and knowledge) intensive industries than the rest of the country. Whatever the remote causes of the Italian "anomaly" may be, we provide evidence of a new tendency whereby capital- and knowledge intensive regional structural change has occurred. The literature to date may provide some descriptive and indirect evidence on the dynamics of regional specialization in high-tech industries during the past decades, but previous studies have not addressed the issue of what determines such specialization. The aim of the article is to fill this gap. Our main research question can be summarized as follows: What are the structural characteristics that may explain the regional high-tech share in manufacturing? The methodology is based on a panel analysis (GLS with dummies to account for regional fixed effects) over the period 2004-2007. We control for panel level heteroskedasticity, autocorrelation and endogeneity. The results suggest that various factors such as labour force composition, firms borrowing capacity, accessibility, R&D, private and public expenditure and a good cultural environment significantly and positively influence regional high-tech specialization. We also find that a high prevalence of industrial districts may lock-in regional structures away from capital-intensive and high-tech manufacturing activities.