The Incidence of International Trade on Italian Regional Productive Efficiency Performance - an Investigation of Technology Gaps

Abstract

Although European Single Market (ESM) has been widely perceived as a model for regional integration, there continues to be considerable debate about the impact of this integration on the EU regions. Studies in this field have mainly investigated the convergence-divergence issue, while the effect of ESM on regional performance has attracted few empirical studies. The non-parametric metafrontier framework used in this study, as a first stage of analysis, is exploited to account for the heterogeneity between the Italian regions in the whole period and in two distinct time periods before and after EMU implementation. In a second stage, using a partial least squares model, the technology gaps estimated for each period have been regressed, investigating possible factors that may have affected regional performance. Our fndings reveal a signifcant improvement for the Italian regions since ESM implementation,a paradoxically unchanged behavior for efficiency performance in the Centre-North regions, and clear identifcation of specifically which regions performed better in terms of the technology gap. The inclusion of variables related to regional trade performance in the model indicates that trade balance is of major importance.