a sub-regional panel data analysis

We analyze the consumption of non-life insurance across 103 Italian provinces in 1998-2002 in order to assess its determinants, in the light of the empirical literature. Using sub-regional data we overcome an im-portant limitation of cross-country analyses, i.e. the systemic hetero-geneity due to country-specific characteristics. Individual heterogeneity is accounted for through panel data techniques. However, considering spa-tial units within a single market raises issues of cross-sectional or spatial dependence, either due to common nationwide and/or regional factors or to spatial proximity. We carefully assess spatial dependence, employing recent diagnostic tests, finding out that the regressors included in our specification successfully account for spatial dependence. Insurance turns out to depend on income, wealth and some demographics, as already es-tablished, but also on trust, judicial efficiency and borrowing conditions. This finding helps in explaining the gap between Central-Northern Italy and the South of the country.