Welcome to Northern Italy. That is, the Po Valley
How attractive are Italian regions and provinces for active entrepreneurs? How are they ranked as destinations for manufacturing investment? A research study jointly conducted by CERTET, Bocconi's research center on transport and regional economics, and the Faculty of Spatial Sciences of the University of Groningen has shed light on these aspects.
Predictably, Northern Italy is more attractive than the Southern Italy. Also Central Italy attracts investment, but less than the North. The usual interpretation of these regional divides is no longer satisfactory with respect to what emerges from the data, though. For instance, Northern regions and provinces exhibit high variance in terms of perceived attractiveness, which means that there is a core vs periphery gap in the North, too. The economic core of Northern Italy is the macro-region around the Po plain, while the periphery is constituted by regions external to this core (Liguria, Val d'Aosta, Trentino Alto Adige, Friuli). This is surprising, considering that peripheral regions in the North do not suffer from the socio-economic gap hindering Southern Italy's performance. The regions of the Mezzogiorno suffer from uniformly negative opinion, with the exception of Apulia, while Milan and its metro area are by far the most attractive area of the country in the eyes of investors and entrepreneurs.
This portrait of the country, where there is more to the eye than the usual North/Center/South hierarchy, emerges from all the firms interviewed for the study. Consider that Southern firms, while giving a relatively more positive appraisal of their own region as site of business (the so-called self-locational effect), also consider the regions and provinces of the Po basin decidedly more attractive than the rest. The explanation for the business perceptions found in the study is essentially threefold: accessibility in terms of transportation and communication, economic and geographic centrality, economies of agglomeration.
The mega-city that stands on both sides of the Po river benefits from geographic and economic advantage, and better infrastructure and transport links, with respect to other Italian and European areas (in the case of Milan, think about the unique advantage of having three airports), high population density, and a strong clustering of various industries, which in turn unleashes all the positive externalities known as agglomeration economies. Conversely, less attractive areas suffer from their peripheral location, lack of infrastructure, thin manufacturing networks, and in some Southern regions, the adverse economic effects of organized crime.
Other factors usually considered in the economic literature, such as quality of human capital, efficiency in public administration do not seem to matter in determining regional hierarchies within Italy. The implications for economic policy are fairly straightforward. In weaker areas, and especially in Southern regions, the vulnerabilities brought by low accessibility and low security need to be attacked immediately with political action and investment in infrastructure. In stronger areas, the localization advantage acknowledged by the business community (high levels of accessibility and centrality in terms of transportation and production hubs) needs to be defended, so that the regional core within the North can maintain its leading role as driver of the economy of the whole country.