N. 14/01 by Roberto BASILE

The locational determinants of foreign-owned manufacturing plants in Italy: the role of the South

ABSTRACT

This paper analyses the locational determinants of FDI inflows in Italy. In particular, it focuses on the role of different kinds of externalities generated by the private and public sector. Moreover, it tries to assess the commonly-heard assertion that the FDI inflow in the South of Italy (Mezzogiorno) is disappointingly low. Given the discrete nature of the data (count data), a random-effect negative binomial-regression model was used to test the a priori expectations of the locational determinants of FDI inflows. The results show that the number of new foreign entrants is positively correlated to the following provincial characteristics: infrastructures, the demand level, the education attainment and the prior concentration of manufacturing plants (in particular, of foreign-owned manufacturing plants). Moreover, the crime rate acts as entry deterrent for foreign firms. Finally, according to the econometric results, the amount of FDI in Southern provinces is by no means smaller than what one would expect, given their current level of development.