Abstract

The paper reviews the main results of a research project on the Mezzogiorno carried out by Bank of Italy in 2008-09 to investigate the chronic relative backwardness of Italy's southern regions. Per capita output in the South is less than 60 per cent of that in the Centre and North; one fifth of the jobs in the South are in the «informal» sector; Southern regions contribute relatively little to international trade. Economic and social indicators do not show any significant closing of the gap compared with the more advanced regions of the country. The paper provides data and analyses that can enhance the debate on the policy actions to be taken. It focuses on two main issues: i) the lower quality of public services in the Mezzogiorno, which applies to all levels of government and is usually not associated with a lower level of public spending; and (ii) the limited effectiveness of subsidies to firms. Incentives are frequently provided for projects that firms would have undertaken anyway. Subsidies are therefore not the key to achieving a lasting development of productive activities. The paper's main conclusion is that there is a need to improve the quality of the services supplied by every administrative body or provider of public services. Without improvements in education, health care, civil justice and the regulatory environment, the South is unlikely to close the development gap. A significant increase in public spending is not required; rather, it is crucial to refine and make better use of the indicators of government performance.