No blessing, no curse? On the benefits of being a resource-rich southern region of Italy

Abstract

The aim of this research is to examine the aggregate economic effects of large-scale oil extraction in Basilicata, a southern region of Italy. This paper is the first empirical attempt to test for a regional resource curse by constructing a comparison unit using synthetic control techniques. The comparison unit captures how Basilicata's economic activities would have evolved in the absence of the oil extraction industry. The negligible differences between economic parameters in Basilicata and in its comparison unit suggest that a large amount of oil extraction has had no detectable effect on Basilicata's economy. Results indicate that achieving economic development in resourcerich regions requires targeted economic policies in support of the resource exploitation, in order to effectively impact the local economy.JEL Codes N54, O13, Q32, R15, R58.

The Basilicata Wealth Fund: Resource Policy and Long-Run Economic Development in Southern Italy

“…As the Norwegian wealth fund is a state owned fund independently administered by the Norwegian central bank, the BWF could be established as a regionally owned fund independently administered by the central bank of Italy, under a speci…c and transparent regulatory framework. This institutional framework does not di¤er substantially from the current institutional framework, in which the region of Basilicata receives from the Italian state the 100% of the royalty revenues paid from extracting companies on the value of the oil extracted (Iacono, 2015).…”

“…The BWF would be a regionally owned investment fund, however independently administered from national authorities (for instance, as an independent legal entity under the jurisdiction of the Bank of Italy) 1 . This institutional framework does not substantially deviate from the current institutional framework, in which the region of Basilicata receives the 100% of the royalty revenues paid from extracting companies to the Italian State (Iacono, 2015).…”

“…The recent empirical studies of Percoco (2012), Rocchi et al (2015), Iacono (2015) and Biasi (2015), all point in the direction of missing or negligible positive e¤ects from oil extraction activity in Basilicata. Percoco (2012) exploits a geographical Regression Discontinuity Design (RDD) in order to obtain the causal e¤ects of almost two decades (1991 2008) of large-scale oil extraction on per capita extra enterprise creation.…”

“…The results show a positive e¤ect of 0; 01 per capita extra …rms, connected to a rather modest increase in employment of 2500 labour units. Complementary to the study of Percoco (2012), the quantitative comparative case study by Iacono (2015) estimates the general equilibrium e¤ects of oil extraction activity and royalty revenues (1980 2009) on the Basilicata regional economy. Iacono (2015) implements the Synthetic Control Method (SCM) in order to construct a data-driven comparison unit to the treated region of Basilicata, and con…rms that the causal e¤ects on a set of regional macroeconomic variables (real GDP per capita, employment rates and gross …xed investments) are negligible.…”

“…Complementary to the study of Percoco (2012), the quantitative comparative case study by Iacono (2015) estimates the general equilibrium e¤ects of oil extraction activity and royalty revenues (1980 2009) on the Basilicata regional economy. Iacono (2015) implements the Synthetic Control Method (SCM) in order to construct a data-driven comparison unit to the treated region of Basilicata, and con…rms that the causal e¤ects on a set of regional macroeconomic variables (real GDP per capita, employment rates and gross …xed investments) are negligible. Rocchi et al (2015) construct a multi-sector model of the Basilicata region built on a Social Accounting Matrix (SAM), in order to analyze the potential impact on regional development (on both economic growth and distributive aspects) of the allocation of royalty revenues (1997 2010).…”