The North–South Divergence in Italy during the Great Recession

Abstract

The economic recession that followed the 2007 crisis has widened the economic gaps between the wealthiest and the relatively poorer regions in Italy. The Great Recession has changed the importance of local economic strengths and hindered the possibilities of economic recovery, especially in the Mezzogiorno of Italy. We seek the local strengths present in Italian regions in the post-crisis period by comparing two macro areas to observe strong and weak points for intervention. A first analysis using multivariate adaptive regression splines (MARS) is used to filter the relevant determinants in a large dataset, and a panel data analysis serves to obtain group-specific results. Some effects of the prolonged recession are confirmed in all regions, while some weaknesses of the South, such as financial markets, play an increasing role in the regional development scenarios.