Abstract

This study presents a systematic recognition of regional policies supporting new firm formation in Italy between 1997 and 2005, and performs an evaluation exercise (for the 1997- 2003 period) of their impact on gross entry, exit and net entry in Italian provinces. The analysis is conducted in relation to six different sectors, including manufacturing, construction, commerce, hotels and restaurants, transports, and financial services. We also investigate the influence of the unemployment rate on firm demographics controlling for other provincial factors, such as economic growth, economic welfare, whether being a major city and an industrial district located in the territory of the province, the level of wages. Findings indicate that the effects of either direct subsidies or fiscal incentives on both gross and net entry are barely significant or not significant at all, whether those of unemployment on net entry and exit are dependent upon the sector under study, but are mainly negative. This suggests that policies supporting entry do not alter significantly the mechanism regulating firm dynamics at the local and the industry level, and a substantial lack of dynamics in the Italian provincial labor markets.