Local Development, Urban Economies and Aggregate Growth

Abstract

The aim of this paper is to present an overview of the results of a recent research project by the Bank of Italy. The paper analyses the interplay between historical origins, congestion costs, and agglomeration benefits in shaping the Italian urban system. It shows that urban agglomeration externalities (on wages, productivity, or innovation) tend to be smaller in Italy than in other developed countries; it also shows that the costs of congestion are relatively high and that high housing cost-explained by both physical constraints and public administration inefficiencies-discourage mobility. These features have a relevant impact on the development of an advanced urban system with possible negative consequences on the country's ability to grow.The views expressed in this paper are those of the authors and do not involve the responsibility of the Bank of Italy. The usual disclaimers apply.

Housing Constraints and Spatial Misallocation

“…Intuitively, the elasticity of employment to the nominal wage depends on η and γ , and the nominal wage captures the effect of housing prices and amenities 20. The assumption that the residual of costs is 10 percent is consistent withBasu and Fernald (1997)'s estimates of the returns to scale in the United States.…”

“…19 For our baseline, we follow Bureau of Economic Analysis (2013), Piketty (2014), and Karabarbounis and Neiman (2014) and assume α = 0.65 and η = 0.25 , which imply a residual share 1 − α − η of 10 percent. 20 Later, we probe the robustness of our results to alternative values of the parameters (Section V). Although our estimates of TFP are model-driven, they match well independent estimates of TFP obtained from directly estimating production functions.…”

Influencing factors of urban innovation and development: a grounded theory analysis

“…It is necessary to first create a supportive environment for the development of enterprises to improve the city’s innovation capability. A city with strong economic strength can provide enterprises with effective infrastructure as well as enabling infrastructure in terms of government procurement, tax incentives, and financial assistance, thereby creating more favorable conditions for enterprises to develop and become financially sustainable (Wen, 2011 ; Accetturo et al, 2019 ). Industrial agglomeration …”

The agglomeration of knowledge-intensive business services firms

“…The agglomeration of knowledge-intensive business services… See Accetturo et al (2019) and the references therein for a number of studies on agglomeration economies in Italy that have recently implemented the same urban classification.…”