This paper uses the case of Italy to investigate the effects of local financial and socio-institutional development on productivity. The analysis employs firm-level productivity data and exploits variations in banking sector development, judicial enforcement, and social capital across Italian provinces. After controlling for potential endogeneity, our empirical results suggest that the real effects of financial development are conditional on the quality of the socio-institutional environment. In particular, we find that the positive effects of greater financial depth on productivity are stronger when the socio-institutional environment is sufficiently developed. Therefore, to exploit potential productivity gains stimulated by financial development, it is necessary to achieve a higher-quality socio-institutional environment, including reducing the duration of civil trials.

(2014). Local financial development, socio-institutional environment, and firm productivity: Evidence from Italy [journal article - articolo]. In EUROPEAN JOURNAL OF POLITICAL ECONOMY. Retrieved from http://hdl.handle.net/10446/201300

Local financial development, socio-institutional environment, and firm productivity: Evidence from Italy

Moretti, Luigi
2014

Abstract

This paper uses the case of Italy to investigate the effects of local financial and socio-institutional development on productivity. The analysis employs firm-level productivity data and exploits variations in banking sector development, judicial enforcement, and social capital across Italian provinces. After controlling for potential endogeneity, our empirical results suggest that the real effects of financial development are conditional on the quality of the socio-institutional environment. In particular, we find that the positive effects of greater financial depth on productivity are stronger when the socio-institutional environment is sufficiently developed. Therefore, to exploit potential productivity gains stimulated by financial development, it is necessary to achieve a higher-quality socio-institutional environment, including reducing the duration of civil trials.
articolo
Moretti, Luigi
(2014). Local financial development, socio-institutional environment, and firm productivity: Evidence from Italy [journal article - articolo]. In EUROPEAN JOURNAL OF POLITICAL ECONOMY. Retrieved from http://hdl.handle.net/10446/201300
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