Evaluation of Spatial Effects of Capital Subsidies in the South of Italy

DE CASTRIS M. and PELLEGRINI G. Evaluation of spatial effects of capital subsidies in the South of Italy, Regional Studies. The spatial effects of capital subsidies are neglected in the literature even if several industrial policies have a strong spatial dimension. This study disentangles the spillovers generated by subsidized firms from the spatial attraction across neighbour's areas that cannot be attributed to incentive. The presence of specific spatial effects is tested on the reduced form of a spatial autoregressive model evaluating the implicit common factor restriction. The empirical analysis considers the main regional policies in the period 1996-2001 in the South of Italy. The results suggest the presence of a modest spatial crowding out, where subsidized regions attract employment from neighbouring areas.