Public investment and growth: Lessons learned from 60-years experience in Southern Italy

This article analyses the contribution of public investment to economic growth in Southern Italy in the second half of the twentieth century(1951–2011).The Bai–Perron test suggest that economic growth followed three distinct regimes: accelerated growth in the years1951–1973 (average growth rate5.3%); low growth in the period1974–1995(average growth rate1.6%); zero growth on average after1995. Using cointegration analysis,we find a positive effect of public investment on per unit of labour output of the Mezzogiorno in the whole period,1951–2011.However, the estimates of the models how statistically significant parameters of public investment in the first regime,butnotinthesecondregime,wheneconomicgrowthissustainedbybusinessinvestmentandtechnicalchange.Thelastphaseofgrowthseesthenegativeinfluenceofthesocialandinstitutionalenvironmentonthefunctioningoftheeconomy.Thedifferentimpactofpublicinvestmentongrowthovertimeisascribedtochangesinthequalityofinstitutions.