Abstract
Introduction: the paper discusses creating a successful policy for modernization and economic development in underdeveloped regions with prevalence oftraditional regulatory mechanisms. Aims: this article aims at evaluating the short-term results and long-term effects of the industrial policy promoting the formation of industrial districts in Southern Europe. Methods: dialectical knowledge methods of economic and social processes, system analysis, case study, induction methods. Results: the research identifies basic characteristics of the industrial districts and factors, crucial for their appearance and development, both in general and as applied to Central Italy. Having analyzed the effectiveness of industrial districts support policy in Southern Spain and Italy (Mezzogiorno) the research outlines their further development path in the light of modernization. Conclusions: it is shown that industrial districts are not only a concept wellestablished in economic theory, but they do exist in numerous communities with traditional regulatory mechanisms. Even though industrial districts can emerge only following the natural path of development, the government has certain mechanisms to stimulate their development, such as subsidies for business infrastructure development or research grants. Under such a policy, industrial districts act as intermediate institutions, helping to modernize traditional communities and transforming into more standard economic forms along the way
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