Territorial capital and the economic crisis: the role of spatial effects

Abstract

The paper aims at analysing the impact of territorial capital endowment on the economic growth process measured by exports and employment growth for the 103 italian provinces over the period 1999-2012. A broader concept of territorial capital has been used (Camagni, 2009) which takes into account goods and services on the basis of different degrees of appropriability and rivalry (public or private) and of the material or non-material physical content. Our goal is to identify strategic elements of territorial capital that might help to enhance the absorption capacity of provinces or macro-areas in the most recent recession and the possibility of resilience in the future. By making use of a very large data set on Italian provinces consisting of more than 30 indicators of territorial capital, we firstly estimate a 3-periods panel growth model for exports and a 2-periods for employment (due to restrictions on data availability). The model takes into account the differential role of territorial capital indicators before and during the crisis period. Our results, robust to several model specifications, point at social fixed , natural and human capital indicators as the driving forces of the growth process at a provincial level. Aware of the potential misleading results that could arise from neglecting externalities across territorial units, we have also applied spatial econometrics tools (Elhorst, 2010a) to test for the importance of spatial externalities and to discriminate the effects of spatial dependence from that of spatial heterogeneity and of omitted variables.