Italian and Chinese manufacturing sector. Empirical analysis and industrial policy implications

This study is a contribution to the debate on the sustainability of the current Italian productive specialisation. The analysis begins with an innovative test (based on disaggregated data and controlling for product "differences") of the trade overlap hypothesis between the Italian and the emerging economies production, which are engaged on those production commonly classified as "traditional". Firstly, the paper presents such test and introduces a new methodology for selecting the "critical sectors" for which the competition from the emerging economies appears more intense. Secondly, an index of product differentiation is elaborated with the intention of highlighting the substantial differences between Italian products and those of countries such as China. The study concludes with some final remarks on the industrial policy implications of the results of the proposed conceptual and empirical analysis.