THE PRODUCER SERVICES INDUSTRY IN ITALY: LONG TERM GROWTH AND ITS LOCAL DETERMINANTS

This paper analyzes the local determinants of producer services growth in Italy, focusing on agglomeration economies, while taking into account the peculiar features of this sector with respect to the manufacturing one. Using a proper OECD classification, we estimate a dynamic specification, allowing for transitory dynamics around the long run employment path derived from a model in which demand and supply factors are both considered. Compared to the prevailing modelling approach, the spatial scope of externalities is extended to include possible interactions across different urban areas. Our main findings are the following: long run employment growth is positively affected by Marshall-Arrow-Romer externalities, with a minor role played by urbanization externalities. Among remaining supply factors, human capital exerts a positive influence on the long run employment level in the producer service industry; among demand factors, the size of the local market appears to be important, given the still incomplete tradability of the service output. Significant interactions across urban areas are shown to occur; in particular, positive knowledge externalities on local productivity appear to be induced by the location in urban areas contiguous to producer service specialized cities