Related Variety, Trade Linkages, and Regional Growth in Italy

TLDR

The study estimates how regional variety and trade linkages affect economic growth in Italian provinces using export and import data from 1995–2003, and evaluates how the breadth and relatedness of international trade linkages influence growth. The authors analyze export and import data at the province‑sector level to quantify regional variety, trade linkages, and the breadth and relatedness of international connections. Results show that related variety boosts regional growth, while mere connectivity or high knowledge variety alone does not; instead, moderate cognitive proximity of extraregional knowledge sparks intersectoral learning that raises employment.

Abstract

abstract This article presents estimates of the impact of regional variety and trade linkages on regional economic growth by means of export and import data by Italian province (NUTS 3) and sector (three‐digit) for the period 1995–2003. Our results show strong evidence that related variety contributes to regional economic growth. Thus, Italian regions that are well endowed with sectors that are complementary in terms of competences (i.e., that show related variety) perform better. The article also assesses the effects of the breadth and relatedness of international trade linkages on regional growth, since they may bring new and related variety to a region. Our analysis demonstrates that regional growth is not affected by simply being well connected to the outside world or having a high variety of knowledge flowing into the region. Rather, we found evidence of related extraregional knowledge sparking intersectoral learning across regions. When the cognitive proximity between the extraregional knowledge and the knowledge base of a region is neither too small nor too large, real learning opportunities are present, and the external knowledge contributes to growth in regional employment.