Exploring the Determinants of Labour productivity Growth in Italian Regions: a Kaldorian Perspective

The promotion of regional convergence is at the heart of the European cohesion policy,although how to stimulate it still is a debated question in the economic theory. Endorsing a Kaldorian perspective, we investigate the determinants of labour productivity in Italian regions by applying Panel Structural VAR modelling to 1981-2013 data. By esplicitly considering the endogeneity among the studied variables, we find that labour productivity is stimulated by output growth and capital accumulation. Our findings bear important implications in terms of policy advice, leading to the conclusion that considerable public investment is necessary to stimulate economic growth and productivity especially in economically depressed areas, like the Italian Mezzogiorno.