EXPERIENCES WITH TRADITIONAL COMPENSATORY FINANCE SCHEMES AND LESSONS FROM FLEX

This paper describes some policy instruments set up by the IMF and the European Union in order to provide financial assistance to developing countries whose economies are affected by exogenous shocks from exports side. After briefly reviewing the IMF’s CFF and the EU’s STABEX, the paper presents the operational rules of FLEX and comments on how it functioned from 2000 to 2007. The analysis shows that the FLEX facility suffered from there being inadequate finance allocated to ACPs and from delays in the financing procedure. While these constraints greatly limited the impact of FLEX in the application years 2000-2006, the 2008 FLEX revision eased them and, now, FLEX can guarantee financial support more rapidly than in the past and may more satisfactorily cover the financial requirements of ACPs coping with export earnings instability.Developing Countries, Export Earnings Instability, Budget Support

FREE MARKET ACCESS FOR LDCS UNDER THE EBA INITIATIVE. AN EMPIRICAL ANALYSIS USING THE GRAVITY APPROACH

This paper assesses the effectiveness of the Everything But Arms (EBA) initiative launched by the EU in 2001. It evaluates whether EBA was effective in increasing the exports from LDCs to the EU over the period 1995-2006. After arguing that the impact of trade preferences should be estimated by using disaggregated trade flows rather than aggregated trade, the analysis is carried out by considering five products (cloves, coffee, crustaceans, molluscs and vanilla beans) which meet three selecting criteria related to the export intensity of EBA countries, to the real/actual preferences of EBA and to the intra-year distribution of EU tariffs. Furthermore, the exports share of the 5-selected goods with respect to national exports is never marginal and, in many cases, is higher than 60%. From an econometric perspective, we improve the reliability of results by giving more attention to the econometric setting and to measurement of the preferential treatment. The evidence is mixed and while this limits the possibility to draw a general conclusion about the role of EBA, it supports the decision to work using disaggregated data because the evidence provided allows us to gauge the sector specificities which would be hidden when analysing total trade. Results show a positive impact on the exports of crustaceans and vanilla of the preferential treatment granted by the EU under EBA, whereas the evidence is un-conclusive when considering the other three products.Trade preferences, EBA initiative, gravity model, Panel data

STRUCTURAL FUNDS AND ECONOMIC DIVIDE IN ITALY

This paper aims to provide a contribution to the debate on the effectiveness of cohesion policies in Italy. The focus is on the territorial effects of EU spending from 1996 to 2007. The empirical analysis is based on the estimate of an expanded neoclassical growth model in which the Structural Funds are one of the variables that explain the convergence across Italian regions. Using panel data and a dynamic panel estimator we find that the Structural Funds, even having had a greater impact in the South compared to the Centre-North, have not contributed to reduce the economic divide in Italy.Structural Funds, Regional Policy, Economic Divide in Italy

Structural Funds and Economic Divide in Italy

This paper aims to provide a contribution to the debate on the effectiveness of cohesion policies in Italy. The focus is on the territorial effects of EU spending from 1996 to 2007. The empirical analysis is based on the estimate of an expanded neoclassical growth model in which the Structural Funds are one of the variables that explain the convergence across Italian regions. Using panel data and a dynamic panel estimator we find that the Structural Funds, even having had a greater impact in the South compared to the Centre-North, have not contributed to reduce the economic divide in Italy.Structural Funds, Regional Policy, Economic Divide in Italy

Convergence and Regional Productivity Divide in Italy: Evidence from Panel Data

Abstract: Using a panel data model to control for differences in regional technological levels and to take into account endogeneity, we find two key results for the growth of Italian regions. Firstly, we show that the rate of conditional convergence of each region is much higher (from 12% to 18% according to specifications) than that estimated in standard cross-section regressions (2%). Secondly, a large part of productivity gaps across regions cannot be imputed to differences in physical or human capital but it is rather related to relevant differences in Total Factor Productivity (TFP).economic growth, convergence, regional TFP heterogeneity; Italy

REGIONAL ECONOMIC DIVIDE AND THE ROLE OF TECHNOLOGICAL SPILLOVERS IN ITALY. EVIDENCE FROM MICRODATA

This paper assesses the impact of R&D efforts on production in the North and Centre-South of Italy by using a panel of 1203 manufacturing firms over the period 1998-2003. The estimations are based on a nonlinear translog production function augmented by a measure of R&D spillovers. This measure combines the geographical distance between firms, the technological similarity within each pair of firms and the technical efficiency of each firm. The estimation method takes into account the endogeneity of regressors and the potential sample selection issue regarding firms’ decision to invest in R&D. Results show that the external stock of technology exerts a higher impact in the Centre-South of Italy. Finally, it emerges that R&D capital and R&D spillovers are substitutes for Northern firms and complements for Centre-Southern firms.R&D spillovers, Italian economic divide, translog production function, technical efficiency

Do trade preferential agreements enhance the exports of developing countries? Evidence from the EU GSP

The EU grants preferential access to its imports from developing countries under several trade agreements. The widest arrangement, in terms of country and product coverage, is the Generalised System of Preferences (GSP) through which, since 1971, virtually all developing countries have received preferential treatment when exporting to world markets. This paper evaluates the impact of GSP in enhancing developing countries’ exports to EU markets. It is based on the estimation of a gravity model for a sample of 769 products exported from 169 countries to EU over the period 2001-2004. While, from an econometric point of view, the estimation methods take into account unobservable country heterogeneity as well as the potential selection bias which zero-trade values pose, the empirical setting considers an explicit measure of trade preferences, the margin of preferences. The analysis offers new empirical evidence that the impact of GSP on developing countries’ agricultural exports to the EU is positive.Trade Preferences, Developing Countries, Agricultural Trade

Be productive or face decline. On the sources and determinants of output growth in Italian manufacturing firms

We investigate the sources and determinants of output growth of Italian manufacturing firms. Applying stochastic frontier techniques, we decompose output growth into factor accumulation and TFP growth from 1998 to 2003. TFP growth is further decomposed into technological change, efficiency change, and scale effects.We find that both input accumulation and TFP growth are important in explaining output growth. In addition, efficiency change (technological catch-up) is the most significant component of TFP growth. Finally, using a specific formulation of the asymmetric error component, we find that R&D spillovers, banking efficiency and public infrastructures have statistically significant and economically relevant effects on the technological catch-up.growth accounting, stochastic frontiers, TFP, R&D spillovers, banking efficiency, infrastructure, Italian manufacturing firms

EXPLAINING TFP AT FIRM LEVEL IN ITALY. DOES LOCATION MATTER?

This study analyses how firms' internal variables and regional factors affect Total Factor Productivity (TFP) of Italian manufacturing firms. Due to the hierarchical structure of our data, we employ a multilevel model that allows for a clear distinction between firm and region-specific effects. Results refer to 2004-2006 and show, as expected, the importance of firm-specific determinants of TFP. At the same time, they indicate that location matters, in the sense that the context where firms operate plays a crucial role in determining the level of TFP. In more detail, we find that the regional endowment of infrastructure, the efficiency of local administration and the investments in R&D exert a positive effect on firms' performance. We also argue that regional gaps in the endowment of these factors help to understand the dualistic nature of the Italian economy, where a wealthy North coexists with a less developed South.Manufacturing Firms, Total Factor Productivity, Italian Regional Divide, Multilevel Models

Firm heterogeneity in productivity across Europe. What explains what?

This paper analyses the TFP heterogeneity of a sample of manufacturing firms operating in seven EU countries (Austria, France, Germany, Hungary, Italy, Spain and UK). TFP data refer to 2008. The empirical setting is based on the multilevel modelling which provides two main results. Firstly, we show that TFP heterogeneity is largely due to firm-specific features (85% of TFP variability in the empty-model). Interestingly, we find that some key-drivers of TFP (size, family-management, group membership, innovations and human capital) influence heterogeneity in productivity with the expect sign, but do not, on the whole, absorb much of firm-TFP variance, implying that differences in productivity are due to sizable yet unobservable firm characteristics. Secondly, as far the role of localization is concerned, we demonstrate that country-effect is more influential than region-effect in explaining individual productivity. Net of the country-effect, the localisation in different European regions explains about 5% of TFP firm heterogeneity. When considering the case of three individual countries (France, Italy and Spain), location in different regions explains 5.3% of TFP heterogeneity in Italy, while this proportion is lower (3.6%) in France and higher (9.9%) in Spain