Abstract

This paper evaluates the effect of decentralisation on innovation at the provincial level in Italy. We exploit quasi-natural experiments associated with three waves of reforms occurred in 1992, 2001 and 2004, which established 8, 4, and 3 new provinces, respectively. Using a DID estimation approach, we find evidence of a significant detrimental effect of (further) decentralisation on innovation for Northern and Central Italian provinces. In addition, we suggest a potential mechanism that may have explain the reduction associated with the aforementioned reforms. Indeed, consistently with the innovation cost of mafia transplantation, we find that new provinces more exposed to “mafiosi in confino” reduced their innovation output more extensively. We perform a number of placebo tests to check the robustness of our main findings. 

Light lunch provided after the seminar for registered participants; please register below by 10am, 15 February.