Structural Change and Firm Dynamics in the South of Italy

We study the structural change between 2001 and 2018 in the Centre-North and the South of Italy, focusing on productivity dynamics and microeconomic determinants. We document three main results. First, the deindustrialization process in the South started after the financial crisis and was more pronounced than in the Centre-North. In the South, the employment shares in low knowledge-intensive services increased more than in the Centre-North and in the high knowledge-intensive services increased less. Second, structural changes slowed down productivity growth in the Centre-North, but had no role in the fall of productivity registered in the South. Finally, in the Centre-North employment growth has been driven by the net creation of jobs among incumbents and larger firms. In contrast, employment dynamics in the southern regions largely reflected the process of firms entering and exiting the market, in particular in less knowledge-intensive service sectors, and in young and smaller enterprises