Ebook FrancoAngeli

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V OL .8 - N .3/2009 R S

Transcript of Ebook FrancoAngeli

Roberta CapelloThirty Years of Regional Science in Italy: An Introduction Trent'anni di scienze regionali in Italia: un'introduzione

PART 1. REGIONAL DEVELOPMENT AND GROWTHAntonio G. CalafatiMacro-Regions, Local Systems and Cities: Conceptualisation of Territory in Italy since 1950Macro-regioni, sistemi locali e città: la concettualizzazione del territorio italiano dal 1950Gioacchino GarofoliRegional and Local Development Sviluppo regionale e localeRoberta CapelloMacroeconomic Regional Growth Models: Theoretical, Methodological and EmpiricalContributionsModelli macroeconomici di crescita regionale: contributi teorici, metodologici ed empirici

PART 2. KNOWLEDGE, INNOVATION AND REGIONAL DEVELOPMENTEnrico CiciottiInnovation, Technological Diffusion and Regional DevelopmentInnovazione, diffusione tecnologica e sviluppo regionaleRiccardo CappellinKnowledge Economy and Service ActivitiesEconomia della conoscenza e servizi

PART 3. URBAN ECONOMICS, MODELS AND REGIONAL ECONOMICPLANNINGRoberto CamagniAgglomeration, Hierarchy, Urban Rent and the CityAgglomerazione, gerarchia, rendita urbana e la cittàLidia DiappiModels in Understanding and Planning the City I modelli nell’analisi e pianificazione della cittàAurelio BruzzoRegional Economic PlanningProgrammazione economica regionale

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OL.8 - N.3/2009

VOL.8 - N.3/2009

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Scienze Regionali

Italian Journal of Regional Science

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Scienze RegionaliItalian Journal of Regional Science

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Direttore: Roberta Capello

Comitato di redazione: Roberto Basile, Ugo Fratesi, Marco Percoco, Carlo Salone, CorradoZoppi

Comitato scientifico: Antoine Bailly, Dino Borri, Roberto Camagni, Riccardo Cappellin, PaulCheshire, Enrico Ciciotti, Sergio Conti, Paolo Costa, Juan Cuadrado Roura, Giuseppe De-matteis, Andreas Faludi, Vincenzo Fazio, Bruno Gabrielli, Gioacchino Garofoli, Emilio Ge-relli, Adriano Giannola, Luigi Fusco Girard, Italo Magnani, Dino Martellato, Guido Marti-notti, Peter Nijkamp, John Parr, Elio Piroddi, Marco Ponti, Denise Pumain, Lanfranco Senn,Stefano Stanghellini

Responsabile di redazione: Antonio Affuso

Sede della redazione: Dipartimento di Ingegneria Gestionale, Politecnico di Milano, PiazzaLeonardo da Vinci 32, 20133 Milano - tel. 02.2399.2750, fax 02.2399.2710 - e.mail:[email protected]

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Autorizzazione Tribunale di Milano n. 82 del 4 febbraio 2002 – Quadrimestrale – Diretto-re responsabile: Stefano Angeli – Poste Italiane Spa - Sped. in Abb. Post. - D.L. 353/2003(conv. in L. 27/02/2004 n. 46) art. 1, comma 1, DCB MilanoCopyright © 2009 by FrancoAngeli s.r.l. – Stampa: Tipomonza, via Merano 18, Milano

III quadrimestre 2009 – Finito di stampare nel mese di ottobre 2009

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Scienze RegionaliItalian Journal of Regional Science

Vol. 8 – n. 3, 2009

Numero Speciale - Special Issue

Thirty Years of Regional Science in Italy: Retrospect and Prospects

Edited by Roberta Capello

Sommario / Table of Contents

Roberta Capello Thirty Years of Regional Science in Italy: An Introduction ..........................................5Trent’anni di scienze regionali in Italia: un’introduzione

Part 1. Regional Development and Growth

Antonio G. CalafatiMacro-Regions, Local Systems and Cities: Conceptualisation of Territory in Italy since 1950 ............................................................................................................ 11Macro-regioni, sistemi locali e città: la concettualizzazione del territorio italiano dal 1950

Gioacchino GarofoliRegional and Local Development ...............................................................................35Sviluppo regionale e locale

Roberta CapelloMacroeconomic Regional Growth Models: Theoretical, Methodological and Empirical Contributions ..............................................................................................59Modelli macroeconomici di crescita regionale: contributi teorici, metodologici ed empirici

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Part 2. Knowledge, Innovation and Regional Development

Enrico CiciottiInnovation, Technological Diffusion and Regional Development ...............................81Innovazione, diffusione tecnologica e sviluppo regionale

Riccardo CappellinKnowledge Economy and Service Activities ..............................................................101Economia della conoscenza e servizi

Part 3. Urban Economics, Models and Regional Economic Planning

Roberto CamagniAgglomeration, Hierarchy, Urban Rent and the City ................................................127Agglomerazione, gerarchia, rendita urbana e la città

Lidia DiappiModels in Understanding and Planning the City .....................................................151I modelli nell’analisi e pianificazione della città

Aurelio BruzzoRegional Economic Planning ....................................................................................171Programmazione economica regionale

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Scienze Regionali Vol. 8 – n. 3, 2009, pp. 5-10 Thirty Years of Regional Science in ItalyItalian Journal of Regional Science Special Issue

Thirty Years of Regional Science in Italy: An Introduction

Roberta Capello* (Paper first received, June 2009; in final form, September 2009)

On 21 November 1980, in Rome, a group of promising young scientists, animated by intellectual curiosity in territorial problems and by a shared scientific interest in a relatively new and intriguing discipline then emerging in both the United States and Europe, founded AISRe (Associazione Italiana di Scienze Regionali), the Ital-ian Section of the Regional Science Association International. Nearly thirty years have passed since that day. The promising young scientists have become eminent professors; and there have grown up two further generations of regional scientists, to the first of which I belong.

Over these nearly thirty years, much work has been done by Italian regional scientists and their association, and I am delighted to be able to celebrate the thirtieth anniversary of AISRe in two institutional positions: as President of the Regional Science Association International and as editor of the Italian Journal of Regional Science. My role in the international community provides me with a worldwide benchmark against which to measure Italian scientific endeavour in regional science. My editorial role allows me to celebrate the thirtieth anniversary by bringing together a selection of eminent Italian regional science scholars (some are founders of AISRe, others belong to the younger generations, but common to them all is their dedication to the Association as past-presidents, past-secretaries or past-treasurers), my purpose being to highlight the major steps regional science have done thanks to Italian contributions, and where the present scientific chal-lenges for Italian scholars lie. The difficult and rather ambitious exercise under-taken by this special issue is a way to hand over to future scientific generations an overview of past achievements and of the challenges that confront us.

Regional science addresses a broad array of themes on which Italian scholars have provided important contributions over the last thirty years. In order to clarify the aim of this special issue, and not to create too many expectations, it is impor-tant to say that it has been necessary to select among these themes by privileging theoretical issues into which an Italian cultural paradigm has extended its roots. However, there are themes whose absence from this special issue I strongly regret: namely, “infrastructure and regional development”, “urban planning” and “meth-ods in regional science”. These themes warrant particular attention in the history of Italian regional science, and they could become the subjects of specific special issues. I hope some of my colleagues will have the endeavour and the pleasure of undertaking such a task.

* Department of Management, Economics and Industrial Engineering, Milan Polytechnic, Piazza Leonardo da Vinci 32, 20133 Milano, Italy, e-mail: [email protected].

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In retrospect, one can incontrovertibly claim that the Italian Section has always played an important role within the wider international scientific community of regional scientists. This is true on both the institutional/organizational side and from the scientific point of view. On the institutional side, Italian scholars have generously served the supranational associations of regional science. The Italian Section records a past president, Roberto Camagni, a vice-president, Riccardo Cappellin, and two treasurers, Roberta Capello and Lidia Diappi, of the European Regional Science Association, as well as members (like Giovanni Rabino and Aura Reggiani) of the organizing boards of ERSA and RSAI, and the current president of the RSAI. From the organizational point of view, AISRe has always been highly active in Europe: two European Regional Science conferences have been held in Italy (Milan, 1984 and Rome, 1997), as well as a Summer Institute (Arco, 1986). Moreover, Italian scholars sit on the editorial boards of well-established scien-tific journals in the field, such as The Annals of Regional Science, and of recently launched ones like Letters in Spatial and Resource Science. From the scientific point of view, this special issue bears witness that scientific breakthroughs have been achieved by Italian scholars in most of the important fields of regional science: local development, macroeconomic growth theories, urban economics, innovation diffusion and knowledge creation, urban and regional planning, models and meth-ods in regional science.

All the institutional and organizational endeavours of AISRe have gained recog-nition over time. Italian regional scientists have always had close links with the international scientific community through international scientific collaborations. Eminent regional scientists such Walter Isard, Rolf Funck, Philippe Aydalot and Peter Nijkamp have been scientific referents for generations of Italian scholars. Ital-ian scholars have built important international scientific networks (to mention only two: the GREMI association on the concept of “innovative milieux” co-chaired by Roberto Camagni; and NECTAR, a scientific network on transport research, at present chaired by Aura Reggiani).

Notwithstanding all these international linkages and this close scientific coopera-tion, the Italian section has its own specific features with respect to the international community, both in its scientific profile and in its organizational structure. From the latter point of view, AISRe has always been characterized by the willingness of its members to develop scientific activities from an inter-disciplinary perspec-tive, being driven by the common purpose of creating and developing a cultural project around the notion of territory from all the perspectives from which it can be analyzed (economic, physical, geographical). Testifying to this interest is the large number of scientific activities organized by the Association: courses for civil serv-ants (the famous Capri courses in the early 1980s) and for Ph.D. students, scientific workshops for scientists and scholars. All of these still absorb most of the Associa-tion’s organizational and financial resources. And the annual conference is still a major event on the calendar for the Italian regional science community.

The Italian Section has another feature which distinguishes it from the other European associations: more than the latter, AISRe is a multidisciplinary association

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Thirty Years of Regional Science in Italy: An Introduction

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the majority of whose members are regional economists and planners but which also accommodates sociologists and geographers. In the early years of its exist-ence, the AISRe’s multidisciplinary approach led to a number of scientific break-throughs: for example, a model of urban dynamics rather innovative at that time – the SOUDY model – was the result of a joint cooperation among economists, planners and mathematicians.

If an interest in developing a common cultural programme has characterized AISRe, the scientific results have been even more impressive: AISRe has made a decisive contribution to the development of a cultural paradigm around the notion of endogenous development. Launched by scholars with various back-grounds (economists like Giacomo Becattini and Giorgio Fuà; sociologists like Arnaldo Bagnasco; planners like Bernardo Secchi) at the beginning of the 1970s, the endogenous development, or “development from below” approach, revealed its explanatory capacity when unprecedented phenomena in local economic system dynamics were inexplicable in light of traditional regional growth theories. This approach provided scientists with new scientific tools with which to interpret local development. A genuine Italian culture on the interpretation of regional dynamics developed around the notion of “development from below”, and the “industrial district” model – the archetype of the “development from below” cultural para-digm – has since then come to symbolize Italian culture on local development. The Italian regional science section has been a fruitful scientific environment in which this cultural paradigm has been able to nourish itself with new theoretical ideas and with increasingly sophisticated tools for empirical analysis.

Today, the “development from below” approach is well known also abroad, and it has been visited and revisited in its aims and scope. The milieu innovateur theory, developed since the early 1980s through fruitful and long-lasting Italian-French cooperation, is the dynamic version of the local district paradigm in which local externalities – in the form of collective learning and uncertainty reduction in inno-vation activities – explain most of the innovative performance of local areas. More recently, a similar approach has been adopted and developed by many schools around the world (the Scandinavian school of Lundvall, Johannisson and Maskell, the French proximity school of Gilly, Rallet and Torre, the Californian school of Scott and Storper, the Austrian school of Stöhr and Tödtling, and other scientists in Spain, such as Antonio Vasquez-Barquero and Joan Trullen). All these schools have found a useful and fertile framework of analysis in the development-from-below approach, and in its dynamic version, that of the “innovative milieu”.

This cultural paradigm is pervasive, and it traverses themes and subjects that are typical of regional science. As witnessed by the chapters that follow this introduction, the “development from below” approach characterizes the innova-tive advances achieved by Italian scholars in many fields. In that of innovation and knowledge creation, the milieu innovateur theory was the first to investigate the territorial channels through which the cross-fertilization of ideas takes place, depending on the socio-cultural atmosphere of the local areas. More recently, the creation of knowledge has been seen as more dependent on strong interactions

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Roberta Capello

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among actors, firms, and institutions. Cooperation among these actors is embedded in the socio-economic structure of an area and is therefore highly territorialized.

In macroeconomic regional growth models, one of the advances made by Ital-ian scholars is the idea that regional competitiveness should be explained simul-taneously by both endogenous elements (entrepreneurial capability) and external (macroeconomic and macro-territorial) conditions. This interpretation reinforces the explanatory capacity of the development-from-below approach because it avoids the circular reasoning of pure endogenous approaches (“there is industrial development because there is entrepreneurship”), and it is able to answer the ques-tion “why now and not before?”. In urban economic theory, new insights have been provided by Italian scholars into the concept of the city as a milieu, i.e. as a place where synergy and cooperation enable the socialization of risks and foster collec-tive learning processes.

The chapters that follow provide a picture of this cultural paradigm in more precise terms, and introduce many other issues that characterize Italian scholarship in regional science. I leave the readers discover the specific advances achieved in each field. From my point of view, editorship of this special issue has been a valu-able scientific experience, an opportunity to look back on what has been done, to admire the work of Italian pioneers in the field, and to point out the main future challenges, which I hope that the generation to come will grasp as opportunities.

Personally speaking, the existence of AISRe has been a reference point through-out my academic career, a gateway to a group of talented scientists animated by high intellectual curiosity in territorial issues, a place where I have been able share my scientific ideas, and where I have been able to learn the arts of diplomacy and leadership vital for my subsequent institutional roles. But above all AISRe has been a link to international networks, to a worldwide scientific community, of which I have become part without renouncing a strong identity and sense of belonging to a cultural background. For all these reasons, I am glad to celebrate the thirtieth anniversary of our Association, with the hope that many more will follow.

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Part 1. Regional Development and Growth

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Scienze Regionali Vol. 8 – n. 3, 2009, pp. 11-34 Thirty Years of Regional Science in ItalyItalian Journal of Regional Science Special Issue

Macro-Regions, Local Systems and Cities: Conceptualisation of Territory in Italy since 1950

Antonio G. Calafati*

(Paper first received, April 2009; in final form, July 2009)Abstract

How to conceptualise the territory has been a controversial issue in Italy both because of the variety of the scientific research programmes seeking to explain territo-rial performances and because of the extent to which the territorial organisation of the economic process has changed in the past five decades. The paper primarily discusses how the Italian territory has been conceptualised since the 1950s, relating changing conceptualisations, on the one hand, to theoretical shifts and, on the other, to the need to capture the rapidly and profoundly changing territorial organisation of the Italian economy. The paper also argues that the introduction and use of the concept of ‘local system’ have raised two fundamental scientific questions which have still to be properly addressed – and are now prominent on the research agenda.

Keywords: territory, cities, local development, regional disparities, Italy

JEL Classification: R11, O18

Macro-regioni, sistemi locali e città: la concettualizzazione del territorio italiano dal 1950

(Articolo ricevuto, aprile 2009; in forma definitiva, luglio 2009)Sommario

Come concettualizzare il territorio è una questione controversa in Italia, sia per la varietà dei programmi di ricerca che hanno affrontato il tema delle disparità regionali sia per la profondità e complessità dei cambiamenti nell’organizzazione territoriale che si sono avuti negli ultimi cinque decenni. Il lavoro discute, nella prima parte, le diverse concettualizzazioni del territorio italiano che sono state proposte dal 1950 ad oggi, mettendole in relazione, da una parte, con i cambiamenti nelle prospettive teoriche e, dall’altra, con l’esigenza di interpretare il rapido cambiamento delle forme di territo-rializzazione del processo economico. Nel lavoro, inoltre, si sostiene che l’introdu-zione del concetto di “sistema locale” ha sollevato due questioni scientifiche fonda-mentali, che non sono state ancora affrontate e che ora sono in una posizione di rilievo nell’agenda di ricerca.

Parole chiave: territorio, città, sviluppo locale, disparità regionali, Italia

Classificazione JEL: R11, O18

* Dipartimento di Economia, Università Politecnica delle Marche, Piazzale Martelli 10, 60121 Ancona, Italia, e-mail: [email protected].

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1. Introduction

In Italy since 1950 national economic development has been accompanied by striking differences in regional performances. Against the background of Italian society’s profound awareness of regional disparities – and, consequently, of the political relevance of the issue – the factors explaining these differences have been extensively researched and, by implication, also ways to differentiate (‘regional-ise’) the national territory have been largely debated.

Indeed, how to conceptualise the territory, which is not a simple task to accom-plish, has been a controversial issue in Italy both because of the variety of the scien-tific research programmes seeking to explain territorial performances and because of the extent – probably unparalleled in Europe – to which the territorial organisa-tion of the economic process has changed in the past five decades. Consequently, in the Italian debate on local development the theoretical question of explaining regional performances is intermingled with the methodological question of how to identify the units for territorial analysis.

The paper primarily discusses how the Italian territory has been conceptualised since the 1950s, relating changing conceptualisations, on the one hand, to theoretical shifts and, on the other, to the need to capture the rapidly and profoundly changing territorial organisation of the Italian economy. Retrospectively, with regard to the interpretation of the Italian territory, the paper suggests that a ‘conceptual trajec-tory’ can be discerned, one that starting from the long-established North-South partition has led to the view of the Italian territory as a pattern of ‘local systems’. And, consequently, local systems’ economic performances have become a major object of interest in the Italian scientific community – and a field of study in which a substantial body of research has been conducted.

The paper also argues that the introduction and use of the concept of ‘local system’ in the interpretation of regional performances, and the theoretical shift associated with it, have raised two fundamental scientific questions which have still to be properly addressed – and are now prominent on the research agenda. Firstly, they have raised the question of the classification of Italian local systems accord-ing to their ‘structural features’ – a step that will highlight, among other aspects, the central role of ‘urban systems’ in the Italian economy. Secondly, they have raised the question of a theoretical synthesis which moves on from the research programmes elaborated or simply outlined in Italy over the past two decades to understand or explain local systems’ development trajectories.

After discussing the rationale of the Northern Italy/Southern Italy partition (section 2) the paper addresses the question of the introduction of the category ‘Third Italy’ in the scientific discourse, and the subsequent shift to local systems as units for analysis of territorial performances (section 3). In section 4 the main research programmes put forward in Italy to explicate local development trajec-tories are outlined briefly, whereas in section 5 the discussion on local systems as empirical objects is summarised. section 6 highlights the methodological, theoreti-

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cal and policy implications of correcting classifying Italian local systems. Finally, section 7 outlines the current research agenda in this field of study.1

2. Northern Italy vs. Southern Italy

For about a century, and until recently, the standard regional conceptualisation of the Italian territory was based on the ‘Northern Italy’/‘Southern Italy’ dichotomy. Although other regional conceptualisations of the national territory were forcefully advocated as more appropriate in the decades from the formation of the nation state until the 1950s2, the North/South partition came to dominate public discussion and was also the conception that economists and policy-makers deemed most appropri-ate for analytical and policy purposes. This conceptualisation of the Italian territory was fully reflected in public policies, but it was also created by them. The need to re-equilibrate the regional distribution of economic activities was one of the most closely discussed issues after the formation of the Italian national state (1861), and it became a matter of urgency in the 1950s. Once the ‘Cassa per il Mezzogiorno’ – probably the most ambitious regional development plan devised and implemented by a European country – had been established, the North/South interpretation of the Italian territory came to be seen as a matter of fact.

Southern Italy in its entirety was classified as a ‘backward region’. The same methodological perspective was adopted to interpret the territory of Northern Italy, which was also seen as homogenous in terms of territorial performances. This led to the dichotomised interpretation of the Italian territory which was widely embraced by public and scientific discourse for many years, and which still persists.3

In economics, territories differ on two interconnected levels: (a) economic performances; (b) territory-specific factors which account for economic perform-ances. What is scientifically relevant is determining the ‘territorial factors’ which a given research programme considers to be the causes of territorial performances. The ontological specificity of a territory, therefore, derives from the factors that characterise it (and that can be interpreted according to the theory as ‘causes’ of its economic performances).

The macro-region ‘Southern Italy’ was thought to be different from the macro-region ‘Northern Italy’ at different levels of description. The standard issue of differences in the stock of capital – private and collective physical capital, but also human capital – was given the importance that growth theory claimed to be warranted. But what is particularly relevant from a methodological and critical-

1. In this paper bibliographic references are rather selected and they have to be understood primarily as signposts to the huge body of literature on Italian local development which accumu-lated over the last 30 years – and that could not be fully reviewed here.2. For instance, the partition between mountain and non-mountain territories, which is obviou-sly significant in Italy given its physical geography, was prominent in the policy debate until the Fifties.3. These territorial partitions were internally differentiated in the context of EU policies of ‘structural funds’. However, this differentiation has not attracted much scientific interest.

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Antonio G. Calafati

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historical perspective is that institutions – formal and informal constraints – were introduced as causal factors explaining regional performances (Cafiero, 1996). Development economics (Hirschman, 1959; Myrdal, 1971; North 1990), a scien-tific research programme behind much reflection on the economic backwardness of Southern Italy, pointed to institutional features as explanans of economic perform-ances – in addition to the level of capital accumulation and other more standard factors.

Admittedly Southern Italy’s institutional specificity was not fully articulated in the economic literature. However, two main institutional features can be identified as those referred to implicitly or explicitly as explanans in the economic discourse about Southern Italy backwardness. Firstly, the role of power in the allocation of private property rights. Secondly, the ‘symbolic nature’ of the policy making proc-ess, which systematically addressed the question of re-distribution of social prod-uct without any reference to the net economic effects of allocation choices. These two institutional features were seen as causes of the large general mis-allocation of economic resources, and as a formidable obstacle to entrepreneurial activity.4

The inclusion of institutions as explanatory variables in models of economic development did not amount solely to a change in the explanatory framework: it gave an analytical foundation to the dichotomized conceptualisation of the Italian territory which emerged as a matter of fact in the Fifties (against the background of an interpretation deeply rooted in Italian culture). In fact, institutions character-ising Southern Italy were described as different from those prevailing in the rest of Italy, and this difference was a further, and even more important, justification (besides the lower stock of capital) for drawing a distinction between these two macro-regions.

Appropriate consideration of the institutional specificity of territory was not the only methodological insight that development economics furnished to the economic discourse on the Southern Italy’s backwardness. A further key methodological innovation was the importance assigned to externalities (and linkages) – and conse-quently to ‘spatial proximity’. The role assigned to external economies – and to their spatial distribution – has profoundly characterised the interpretation of South-ern Italy’s territorial performances. In the context of the debate on the ‘Southern question’ external economies were seen as linked by a circular causal chain to the existence of ‘agglomerations’ (as the so-called ‘poles of industrialisation’, which could be created by policy) and ‘cities’. Indeed, the ‘urban question’, which would later surprisingly disappear from the Italian research and policy agenda, emerged as a key issue in the early scientific discourse on Southern Italy’s backwardness. A notable contribution on this issue was made by Cafiero (1976) who highlighted the role that cities (as generators of externalities and complementarities) could play in the industrialisation of the Mezzogiorno (see SVIMEZ, 1987, pp. 160-184). This perspective led to a third way of differentiating territories: Southern Italy was

4. ‘Power’ turned progressively into ‘criminal power’, deeply influencing also the allocation of public resources (and the policy-making process in general).

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Macro-Regions, Local Systems and Cities

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different to the extent that it was endowed with only a few ‘dynamic agglomera-tions’ – either local production systems or cities – , that is, agglomerations generat-ing a high amount of external economies.

The theoretical framework derived from development economics to interpret Southern Italy’s territorial performances, and give support to the structural policies implemented in Southern Italy by the Italian state (and subsequently supported by the European Union’s regional development schemes), was highly innovative, especially for its interdisciplinary nature and the complexity of the constellation of explanans. Although it is not often acknowledged, it indubitably influenced the theoretical frameworks later put forward in Italy to explicate local development trajectories.

3. From ‘Macro-Regions’ to ‘Local Systems’

In the late 1970s Italian social scientists began to point out that it was no longer possible to describe the newly emerged economic landscape, and explain the observed pattern of territorial performances, by relying on the Northern Italy/Southern Italy dichotomy (Bagnasco, 1977; Fuà, Zacchia, 1983). This dichotomy increasingly appeared to be a conceptual legacy which hampered understanding of regional performances and persisting territorial disparities, and also of the new modes of capital accumulation which seemingly prevailed in some parts of the country. Making use of the empirical evidence available on the economic perform-ances of Italian (administrative) regions it was proposed that the Italian territory could be more appropriately conceptualised in terms of three macro-regions, the third being the so called ‘Third Italy’ (Bagnasco, 1977) or the so-called ‘Nec terri-tories’ (Fuà, 1983) – comprising the regions of Central Italy and North-Eastern Italy. Introducing a further macro-region in the scientific and policy debate led not only to a new map of Italian territorial performances. It also stimulated a profound theoretical change.

‘Third Italy’ was thought to be different from Southern Italy and Northern Italy primarily in terms of institutions. And its economic performances, which appeared to be remarkable from many perspectives, could apparently be explained with refer-ence to institutions which were specific to these regions. As previously pointed out, institutions had already been proposed as a justification for distinguishing between Northern and Southern Italy and as explanans of the ‘poor’ economic performances of Southern Italy (and, by contrast, of the remarkable ones of Northern Italy). There-fore, one can affirm that the criteria with which to regionalise the Italian territory did not in fact change: they were still the same as those proposed by development economics in the debate on Southern Italy’s backwardness. What changed in the research programme launched in the 1970s by economic sociology and economics was that the regional mapping of institutions was different from the previous one – and, to a certain extent, also better articulated conceptually and analytically.

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In terms of individuals’ dispositions ‘Third Italy’ was seen as characterised by a strong entrepreneurial orientation of population, in turn generated by the institution of traditional share-cropping system which governed agricultural production (and social reproduction) in most parts of ‘Third Italy’ until the 1970s. In this peculiar form of business organisation peasants were, to a certain extent, entrepreneurs de facto. The second fundamental institutional feature, also related to the share-crop-ping system, was the predominant role of the enlarged family, with its centralised modes of managing the surplus – leading to low levels of consumption and to capital accumulation – and its strong coordination of the decision process. A further crucial institutional feature was that of local (communal) identity, generating a model of social change that may be called, using Hirschman’s phrasing, ‘going ahead collectively’ – or, using Bagnasco’s categories (1988), the ‘social construction of market’. As a consequence trust was a key element of the economic life, drastically reducing transaction costs and, consequently, paving the way to the formation of highly flexible networks of business firms (cf. Williamson, 1985) – one of the most referred to positive features of Third Italy’s local production systems.

Notwithstanding all its methodological and theoretical importance, however, the shift to this new way of conceptualising the Italian territory was deeply unsatis-factory from an economic perspective, and also inadequate for policy purposes. It left unanswered the question of why there were persisting marked differences in economic performances within the territory of ‘Third Italy’. This macro-region was assumed to be internally homogeneous in terms of the discriminating factors selected to explain economic performances, namely institutions. Yet the empirical evidence suggested and corroborated the thesis that it was strongly dis-homogenous with regard to long-run economic performances.

Indeed, ‘Third Italy’ comprised broad territories that had dramatically declined since the 1950s. The available empirical evidence pointed to highly differentiated local patterns of economic change in these regions. Suffice it to consider the devel-opment trajectories of the urban settlements in the Apennines and pre-Apennines of Central Italy to gain an idea of the magnitude of the disparities in economic performances observable in this macro-region, whose generally good or very good economic performance attracted so much attention. The same pattern of local economic growth and local economic decline within the same region was to be observed in North-Eastern Italy and also in North-Western Italy. Rapidly declining territories could be found in Piemonte, Liguria, Lombardia and Friuli Venezia Giula. Southern Italy, too, began to appear to be a highly differentiated territory in terms of local economic performances. Moreover, focusing only on winning areas it was easy to discover striking differences in their long term economic performances.

These findings, which were the result of a methodological change – namely, the observation of territorial performances with an empirically oriented attitude – brought about by the establishment in Italy of ‘regions’ as political-administra-tive units, and by the consolidation of the European Union’s regional policy, put in question the relevance of the regional partition of the Italian territory which predominated in scientific and public discussion in the late 1970s and early 1980s.

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‘Southern Italy’, ‘Third Italy’, ‘Northern Italy’ appeared to be inadequate concep-tualisations of the territory. Against the background of marked intra-regional disparities, it was the intersection of two phenomena that profoundly changed the conceptualisation of the Italian territory, leading to the introduction of the new category of ‘local system’. Firstly, there was the manifestation of ‘exceptional’ local trajectories of industrialisation, which shifted away the focus from regions to “localities”; secondly, the fact that these remarkable cases of industrialisation manifested themselves in terms of clusters of municipalities.

Indeed, the focus on the development trajectories of the regions in the ‘Third Italy’ immediately brought out exceptional cases of local industrial growth: there were clusters of contiguous municipalities – amounting to small or medium sized ‘territorial systems’ in terms of population (from 70,000 to 250,000 inhabitants) – which since the Fifties had experienced accelerated and, to a certain extent, unex-pected rates of industrial growth. On closer scrutiny these territorial systems and their performances appeared to challenge the received explanations of regional development trajectories and, deservedly, attracted much theoretical attention.

Taking ‘clusters of contiguous municipalities’ as units for analysis – that is, focusing on new territorial systems generated by the territorial integration of contiguous settlements (a phenomenon that can be called ‘territorial coalescence’) – seemed necessary to identify these ‘poles of exceptional growth (industrialisa-tion)’ in Central Italy. And scholars began to focus on specific sub-regional areas, separating and distinguishing them from the macro-region or region to which they belonged.5

The phenomenon of territorial integration, which in the early Eighties had already consolidated in Italy, did not go unnoticed. A map of Italy whose elemental units were ‘clusters of contiguous municipalities’ – that is, ‘local systems’ – was proposed for the first time in 1987 by the Italian Central Statistical Office (ISTAT) in collaboration with IRPET, the Tuscany Region’s research institute which had been already exploring the issue for a decade. Sforzi (1987) provides the best account of the conceptual underpinnings of the map of Italian local systems proposed, but it should be stressed that that map was the outcome of a reflection started more than ten years earlier (IRPET, 1978).

The concept of ‘local system’ was the end result of a conceptual and theoretical trajectory one can discern in the interpretations of the Italian territory’s economic performances. Possibly the papers collected in Becattini (1987a) can be regarded as a stepping stone towards establishing local systems as object of theoretical analysis – notwithstanding the fact that their focus on ‘industrial districts’ was too narrow.6

5. Extensive discussion of the phenomenon of ‘territorial coalescence’ in Italy is conducted in Calafati (2002 and 2008) and Calafati, Mazzoni (2008).6. In the neo-Marshallian research programme the issue of identifying the units for territorial analysis has a critical importance because of the importance assigned to ‘positive externalities’ and ‘cognitive proximity’ (‘tacit knowledge’) in fostering innovation and accumulation. And indeed the question of identifying local systems, and of its methodological significance, was repeatedly addressed by scholars engaged in developing this research programme (see Becattini

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However, various research programmes were launched in the Nineties in Italy, addressing the explanation of local development trajectories.

4. Local Systems’ Performances: in Search of an Explanation

The local systems of Central Italy could not be easily differentiated in terms of informal institutions or individuals’ dispositions. The thesis that the Italian territory should be differentiated in terms of these two features at a lower level than that of the above mentioned macro-regional partitions was not explicitly discussed. Conse-quently, different types of explanatory factors in addition to institutions had to be found to explain the local systems’ markedly different performances. On reviewing the body of research conducted in Italy it seems possible to isolate four research programmes seeking to explain local systems’ development trajectories.7

Two research programmes focusing explicitly or implicitly on local systems have been most influential in Italy. They can be respectively labelled as ‘neo-Marshal-lian industrial economics’ and ‘evolutionary regional economics’. These strands of analysis have put forward micro-founded meta-models for the explanation of local systems’ static and dynamic efficiency which have attracted some attention outside the scientific Italian community as well. They have many similarities but they also differ significantly.

Neo-Marshallian industrial economics focused on a sub-category of local system as object of analysis. By formulating the concepts of ‘industrial district’ (Becat-tini 1979, 1987a, 1987c; 1989a, 1989b and 2004) and ‘local production system’ (Garofoli, 1992 and 1993) as ‘spatially bounded relational densities’ this research programme investigated the relationships among agents (individuals and busi-ness firms) that arise at local level not only directly through deliberate exchanges of matter and information but also indirectly through external economies, spill-overs and spin-offs. It may be useful to recall that, in this research programme, the ‘spatially bounded relational density’ (local system) subject to analysis was a ‘local society’: that is, the intersection between a local social network and a local business firms’ network.8 And also to be stressed that, by definition, an ‘industrial district’ is a specific type of industrial local system, one displaying, at certain levels

1987b and 1994; Becattini, Bianchi, 1987; Sforzi, 1987 and 1990). 7. Externalities – positive and negative – are ‘local’ phenomena: that is, they stem from a firm or an individual whose economic process is by definition located at a given point of territory. From that point in space (territory) externalities propagate with decreasing impacts. The spatial/territorial dimension of externalities was omitted from the abstract treatment given to them by neo-classical economics (cf. Mishan, 1971), but it was clearly acknowledged by other approa-ches to the phenomenon (cf. Pigou, 1932; Coase, 1960).8. The relationship between these two localised networks – of business firms and individuals – has given rise to some confusion. In the neo-Marshallian industrial economics the term ‘industrial district’ refers to relational densities made up of the intersection of the two networks, between which there is a (circular) causal relationship. The same applies to the term ‘innovative milieu’ used in evolutionary regional economics.

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of description, features such as a very high degree of specialisation of its manu-facturing sector, a high degree of vertical dis-integration of the production process, and the prevalence of local networks of business firms.

Starting from the single business firm and the technological and organisational features of the industrial sector to which it belongs, analysis in the neo-Marshallian research programme shifted to the localised cluster of firms in which firms were embedded and then to the society in which the cluster itself was seen, in turn, as being embedded. Three different levels of description were proposed: the firm, the local network of firms and the local society. The specific features of these three ‘actors’ were assumed to be interlinked.

This research programme viewed a local system as, among other things, a ‘concentration in space of external economies’ – hence the focus was on the amount and type of external economies that distinguished local systems from each other.9 It also viewed a local system as a ‘concentration in space of collective learning processes’ through spill-over and spin-offs.

The institutional features of the territory were the second focus because the industrial network was seen as embedded in the corresponding overall social network (local society) – which in turn reflected the specific cultural features of the region or macro-region to which the local system belonged. Consequently, two local systems located, for instance, in the ‘Nec territories’ displayed similar patterns in terms of institutions but different patterns in terms of the amount and type of positive externalities (and, possibly, human and physical capital) and collective learning mechanisms.

The third focus was on ‘cognitive proximity’, very often referred to in terms of Michael Polanyi’s concept of ‘tacit knowledge’. Because the ‘learning history’ of individuals is very similar in each local system, most individuals shared the same knowledge about the technology of production. The fundamental consequence of this kind of ‘cognitive proximity’ was that it turned the ‘instinct of workmanship’ (Veblen, 1967) – one of the fundamental conceptual pillars, though only implicitly used in the Italian literature on local development – into the basis of an efficient collective learning process, ensuring the smooth and efficient circulation of incre-mental innovations within the networks of firms and within the system.

Neo-Marshallian industrial economics focused on ‘industrial local systems’ with specific features that entitled them to be defined ‘industrial districts’. Indeed, in Italy in the period 1950-1980 this type of local system achieved exceptional economic

9. Externalities have a limited spatial range within which they remain ‘active’, that is, within which they produce economic effects. It follows that externalities and spatial proximity must be treated as two interlinked phenomena in economics, and that a local system can be described not only as a spatial concentration of individuals (and organisations) but also as a ‘spatial concen-tration of externalities’. Hence agglomerations generate a specific configuration of externalities, besides a specific configuration of transport costs. Any spatial agglomeration of individuals and/or organisations – a nomadic camp, a neighbourhood, a village, a city – has its own configuration of (positive and negative) externalities.

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performances.10 Starting from concrete cases of local industrial trajectories, this research programme thereafter never lost touch with the empirical dimension of the analysis. Yet the empirical counterpart of the theory was rather narrow because only a few Italian local systems are ‘industrial districts’ – and are certainly not the most important ones in terms of population, employment and development potential.

A further research programme focusing on the explanation of local systems’ economic performances – to which in this paper it is referred to with the label ‘evolutionary regional economics’, given its focus on the mechanisms generating technological innovation – was developed in Italy in the Eighties (see Camagni, 1991; Ciciotti, 1993). It distinguished itself from the neo-Marshallian approach to local development firstly by a more encompassing analysis of the mechanisms generating technological innovation in local systems and, secondly, by adopting a more encompassing notion of ‘externalities’ in explanation of local development trajectories.

On the one hand, evolutionary regional economics placed particular emphasis on the dynamic implications of externalities – those generated by social interac-tion at large not just those produced by business firms. Particularly, the research programme of ‘innovative milieu’ paid close attention to the dynamic role of exter-nalities (cf. Camagni, 1991 and 1999; Camagni, Capello, 2002; Cusinato, 2007).

More closely in keeping with the tradition of urban studies, this research programme viewed externalities as phenomena which extended beyond the ‘exter-nal economies’ of the Marshallian tradition. On the other hand, it was stressed that local systems are characterised by ‘negative externalities’ too – and not only by ‘positive externalities’ – and that they differ accordingly. Indeed, starting from this (more modern) perspective would have led to a completely different way of measuring or evaluating local system’s performances, highlighting the classic dichotomy between ‘growth’ and ‘development’, and foregrounding the ecological and social sustainability of local systems’ development (see Camagni et al., 2002; Ciciotti, 2008; Ciciotti, Rizzi, 2008).

While less concerned to emphasise the role of informal institutions (the cultural factor), evolutionary regional economics assigned much importance to governance mechanisms as factor in economic development – stressing the limited capacity for self-organisation of local systems and underlining the role of policies in shaping local development trajectories. Indeed, ‘strategic planning’, the most innovative policy framework in this context, found wide acceptance and further elaboration in this research programme.

Whereas the neo-Marshallian research programme was too closely focused on empirical counterparts (namely, ‘industrial districts’), evolutionary regional economics developed with practically no reference to the empirical counterpart of the concept of ‘local system’. It took the concept of ‘local system’ as an ideal-type,

10. The methodological implications of the concept of ‘local system’ have been discussed, among others, by Dematteis, 1994; Calafati, 2002; Conti, Giaccaria, 2002.

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and moved on to develop a general theory without referring to concrete cases of local systems.

Neo-Marshallian industrial economics and evolutionary regional economics have attracted much attention in Italy – and have also been developed in closer contact with the European scientific community. Yet two other research programmes should be considered, although to date they have attracted less attention (partly because they have not been fully articulated). In fact, the Italian contribution to under-standing local development trajectories goes beyond the insights of the research programmes analysed above.

More concerned with the benefits of comparative empirical analysis, Martel-lato and Sforzi (1990) launched a research programme focusing on Italian urban systems’ economic performances. Taking advantage of the ISTAT’s map of local systems, the focus was shifted away from specific cases of fast industrial growth and directed toward the growth trajectories of large and medium-sized Italian urban systems. A set of urban systems was identified – as a sub-set of the set of local systems identified by ISTAT – and a comparative analysis of their long-term performances was proposed and partly outlined (see Costa et al., 1990). This high-lighted a fundamental question: once the shift to local systems as units for territorial analysis had been accomplished, and once one can rely on a general map of the Ital-ian territory in terms of local systems (whatever the method used to identify them), a necessary further step appears to be a comparative analysis of local systems’ growth trajectories. But given the wide structural differences among Italian local systems – as defined by ISTAT – , comparative analysis was best conducted by focusing on specific types of local systems. And, given their importance, urban systems seemed to be the first type on which to focus.

Two years later, along similar lines, a collection of papers by Costa and Toniolo (1992) further contributed to the development of this research programme. Stimu-lated by a new law (n. 142/1990) that seemingly opened the way to the formal recognition of inter-municipal clusters and to ‘institutional coalescence’, the contri-butions collected in the volume focused on Italian metropolitan areas (de facto the largest Italian urban systems), exploring both with a comparative and case-studies approach their structures and performances.

For reasons that are discussed infra (section 6) this research programme devel-oped slowly, notwithstanding the fact that the ‘functional urban areas’ on which the analysis concentrated were the most important units for analysis of the Italian terri-tory in terms of the generation of employment and income – and which, certainly, contributed to the generation of the national social product more significantly than did the cases of ‘exceptional industrialisation’ on which so much attention had been focused. The procedure used in this research programme to identify the rele-vant ‘functional urban areas’ (or ‘urban systems’) – namely to equate them with ‘local labour systems’ larger than a given threshold in some cases or following ad hoc methods in others – was debatable.11 Yet the research steps proposed by this

11. It is true that the procedure was proposed as ‘an approximation’ (Martellato, Sforzi, 1990).

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research programme – (a) identifying the urban systems (against the background of an encompassing map of local systems); (b) making comparative analysis of their development trajectories; (c) using the case-study approach to further explore the origins of cities’ economic performances – opened the way to a coherent explora-tion of the pattern of territorial performances in Italy.

Comparative analyses of urban development trajectories have not been exten-sively pursued in Italy, and only recently they have regained some attention.12 Yet this is a line of enquiry of indubitable importance, and it is being given an increasing attention in Europe. The European Union has launched the “Urban Audit” Programme (www.urbanautir.org) to collect data for comparative analysis of a selection of European cities. And also in some countries comparative analy-ses of the development trajectories of the main urban systems have recently been conducted.13

A fourth research programme, whose most influential contribution has been a collection of papers edited by Arrighetti and Seravalli (1999) – and whose meth-odological and theoretical underpinnings were outlined, among others, in Bellini (1996) and Seravalli (2006) – can be distinguished in the Italian literature on local development. This emphasises the role of the state in promoting local develop-ment – directly and through its local public or semi-public agencies (‘intermediate organisations’) – by providing public goods and ensuring the efficient allocation of public and private resources through efficacious administrative procedures, well-designed incentives and coordination of decisions (see Barca, 2004; Bellini, Bramanti, 2008).

This approach, which developed in the Nineties re-interpreted the experience of local development in the ‘Third Italy’ during the take-off decades (1950-1980), placing more emphasis on the role that had played public policies in ‘causing’ the observed local development trajectories. According to this interpretation, at the origin of the good performances of the ‘Third Italy’ there was an allocation of resources functional to local development ensured by the efficacy of the local political systems, seen as multi-agents systems in which intermediate public and semi-public bodies had played a crucial role too.

Similarly to evolutionary regional economics, this research programme did not devote much attention to the (crucial) issue of the identification of the units for analysis (and policy intervention).14 Attempts to corroborate the theoretical

Yet in subsequent years it became an orthodoxy which greatly hampered the development of other and more correct procedures with which to identify local systems, and hence urban systems or cities.12. See, for instance, the recent studies by Calafati, Mazzoni (2006 and 2008), Compagnucci (2007), Cirilli, Veneri (2007a and 2007b), which explore in comparative terms the development trajectories of Central Italy’s main urban systems.13. See, for example, ODPM, The State of the English Cities Report (2006).14. The territorial units selected as policy targets in the ‘New Territorial Policy” policy have a weak point. Rather than having a ‘functional’ basis they have been defined accepting (and fostering) a political (bottom-up) coalition building at local level. In this research programme

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insights proposed in this research programme were made by taking ‘administrative regions’ or ‘provinces’ or ‘local systems’, according to the availability of the data for the variables treated as explanans. Trying to avoid a case-study approach – a methodological approach regarded with suspicion by economists notwithstanding its sound epistemological foundations – the empirical analysis made large use of ‘proxies’ to capture regional/local differences in the governance mechanisms and public policy effectiveness which made the empirical results highly questionable and inconclusive.

This research programme, whose theoretical insights are still largely to be exploited, deeply influenced the ‘New Territorial Policy’ launched by the Italian Ministry of the Economy in the past decade (see Barca, 2004). In fact, differ-ently from neo-Marshallian and innovative milieu research programmes, which were mostly concerned with the analysis of in-built and ‘natural’ self-organisation mechanisms, this approach has pointed to the ‘quality’ of the policy-making proc-ess at local level as a key factor in explaining long term economic performances. With practically all the main Italian systems entering a phase of profound structural transformation under the effects of the globalisation of the European economy, the role of policy makers in shaping the future development trajectory, either through the direct provision of public goods or by improving coordination among private actors’ strategies, is difficult to underrate.15

5. Local Systems as Empirical Objects

As discussed in the previous sections, in Italy local systems started to be the object of analysis for various research programmes in the late Seventies. The shift from meta-theoretical analysis to explanation of specific trajectories of local development obliged identification of the object of study in empirical terms. Yet, as already noted, insufficient importance was given to the empirical analysis of local systems. Consequently, the fundamental question of the structural differences among Italian local systems was largely ignored. On the one hand, this affected theoretical analysis; on the other, it greatly hampered consolidation of an appropri-ate policy paradigm (appropriate for fostering local development).

The map proposed by ISTAT suggested as units for analysis local systems which differed greatly: from clusters made up of a few municipalities in the Apennines or in the Alps to local systems that were, de facto, large urban systems. The map comprised local systems endowed with a variety of ‘local structures’ that would have required a taxonomy to classify them. Although there is nothing wrong with an attempt to develop a general theory of local systems, development trajectories,

the relevance of selecting the appropriate units for analysis was acknowledged – see Sforzi’s contribution (1999) in the book edited by Arrighetti and Seravalli (1999) – yet not much practical attention was devoted to it.15. For a recent study on the role of territorial policies in the context of the debate on the future of the EU’s cohesion policy see Barca (2009).

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it seems difficult to pursue this aim without having accumulated and stylised suffi-cient empirical evidence on the object of analysis.16

The somewhat paradoxical situation where the category of ‘local system’ was introduced without giving it a clear-cut empirical counterpart was largely due to how this category had entered centre stage. Neo-Marshallian industrial economics began to develop a theory of local development which addressed the methodo-logical and theoretical challenges raised by ‘exceptional cases of industrialisation’, namely industrial districts. This approach to the question pushed the crucial issue of identifying and conceptualising the different types of local systems into the background. It was sufficient to point to specific cases – treated as archetypical – to think sufficient empirical material was at hand to develop a meta-theory.

Evolutionary regional economics, indeed, did not concern itself with specific empirical phenomena at all. Rather, it endeavoured to meet the challenge of reformulating agglomeration theory, on the one hand, and innovation theory on the other, by drawing on such fundamental theoretical advances as, for instance, Simon’s ‘procedural rationality’ (Simon, 1978). The empirical identification of the object of analysis was simply not regarded as germane to developing a theory of ‘innovative milieus’.17

Yet in the same years when these two research programmes were being proposed, the way towards an empirically grounded approach to the study of local systems had been already opened up by ISTAT, which in 1987 compiled the first map of Italy’s local systems. Since then this identification issue has been addressed empirically and new maps of the Italian territory based on clusters of contiguous municipalities – called ‘local labour systems’ – have been plotted (ISTAT, 1987, 1997, 2005).

The importance of the ISTAT map of Italian local systems has not been correctly understood. One may question the procedure used to identify local systems on the Italian debate on economic development – and one may even want to emend it (Calafati, 2005; Calafati, Compagnucci, 2005). Yet one must acknowledge that, from a methodological point of view, the availability of this map has been a deci-sive factor in understanding local development trajectories in Italy. Firstly, it fulfils the fundamental scientific requirement of providing an empirical counterpart to the category of ‘local system’. If local systems, understood as local relational densi-ties, should be the new units for analysis and territorial policy, as diverse scientific research programmes have maintained, these territorial units should be empirically identified. A general convergence on the same map may not be necessary – scien-tists may want to use different maps compiled using different criteria – but it would be self-contradictory not to make any reference at all to a given map of Italian local systems, whether or not it covers the entire territory.

16. Tuscany is an exception, and much work has been conducted in this region focusing on the empirical features of local systems (see Bacci, 2002). 17. No reference is made, for example, to the question of the empirical identification of the object of analysis in a recent and encompassing collection of papers on ‘innovative milieus’ (Camagni, Maillat, 2006).

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Secondly, the sheer availability of such a map raises a further fundamental scien-tific question: the classification of local systems according to given criteria, that is, the construction of a taxonomy. Close inspection of the map of the 686 Italian local systems shows that they form a rather idiosyncratic set of ‘social objects’.18 They exhibit marked differences in (a) scale, (b) socio-economic structure, (c) spatial organisation and (d) governance system. If these four fundamental features alone were considered, the complexity of constructing a taxonomy would be clear. But what would be also clear – and very important from a scientific perspective – is that the meta-theoretical approach is inadequate. Because Italian local systems differ greatly at so many levels, a much more refined conceptual framework to support explanatory models of local development trajectories is required. The concept of ‘local system’ is important precisely because it suggests that a meta-theory can be constructed for such diverse spatial relational densities as a large tertiary city and a small mountain village, a medium-sized industrial city and a rural town (or network of towns). Yet a shift from the meta-theoretical level to the theoretical level is necessary to introduce the specific features of the type of local system under scrutiny into the conceptual framework.

6. From Local Systems to Cities and Beyond

The empirical counterpart to the concept of ‘local system’ in the Italian discourse on local development is invariably a cluster of contiguous municipalities, which through a process of ‘territorial coalescence’ have evolved into an integrated terri-torial unit. If one focuses on the structure of these local systems from an empirical perspective one immediately realizes that the majority of them are city if observed from a territorial perspective – even though they do not have an institutional (legal) identity. It is therefore surprising – and this is an issue that requires explanation – why this aspect was not immediately acknowledged in the Italian economic litera-ture.19 There has been basically no justification – except for the bias introduced by hidden presumptions – for the unbalanced representation of the Italian territory to date predominant in the scientific and public discourse on territorial development.

This distortion in the focus of analysis thus pushed the study of the structural evolution and economic performances of the most important Italian local systems – that is of the urban systems – into the background. Moreover, it has impeded to

18. Italian local systems numbered 955 in the map for 1981, and 784 in the map for 1991. The reduction in the number of the local systems demonstrates that Italy in the process of ‘territorial coalescence’ is continuing (the number of municipalities remained practically identical over the same decades: 8,100 in the 2001 census).19. Cities have remained at centre stage in evolutionary regional economics (Camagni, 1992; Ciciotti, 1993, chapter 3). But the urban dimension of regional and national economic develop-ment and the comparative performances of cities or the evolution of their structures have not been extensively researched empirically (cf. Calafati, 2007).

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take advantage, in the explanation of local systems’ performances, of theoretical insights already put forward in the field of ‘urban studies’.20

Unlike the scientific paradigms of other social sciences – sociology and anthro-pology, for instance – , those of economics have mostly found it difficult to accom-modate cities. Regional economics too has long neglected cities, and its standard models do not envisage spatial concentration, and hence proximity, as a causal factor of economic phenomena. Spatial concentration has received economic explanation – that is, it has been considered as an explanandum – but it has not been regarded for long as an explanans. Cities – as well as towns, villages, and the like – exist for economic reasons, but they do not have economic effects (apart from reducing transport costs). Yet by moving from the concept of ‘space’ to that of ‘territory’, modern regional economics has turned the structure of agglomerations into a causal factor in economic performances – and by so doing it has de facto opened the way for cities to occupy a key position.21 But cities as systems still remain in the background as objects of economic analysis.

The negative heuristic that has prevented cities and their analysis from occupying centre stage in interpretation of Italian economic development has two main compo-nents: (a) a territorial system is a city if it has political-administrative autonomy; (b) a territorial system is a city if it takes the form of a compact spatial settlement. These two features – political-administrative autonomy, physical compactness – have been implicitly assumed to be constitutive of the concept of ‘city’. It has not been acknowledged that a city is above all a specific kind of ‘relational system’, which may exhibit diverse spatial manifestations and possess diverse regulation procedures (and also diverse sizes).22 The fundamental phenomena of ‘urban (and industrial) sprawl’, on the one hand, and of ‘self-organisation’ on the other, have radically changed the standard conception of the city (Calafati, 2003, 2008). So as the ‘knowledge economy’, which makes it possible to observe collective learning and innovation in ‘small’ local systems too.

If it had been recognised that introducing local systems into the categorial system of economics was equivalent to placing cities at centre stage, important conse-quences would have ensued. This methodological step would firstly have shifted attention from a specific and limited sub-set of local systems to the local systems – urban systems – in which most of the economic process (and of innovative poten-tial) concentrates. Indeed, the focus on ‘exceptional cases’ of local development – no matter how important from the theoretical perspective – was misplaced, since the challenge of explaining the most important local systems was thus not taken up. That focusing on Prato, Pesaro or Faenza was deemed more important than focusing on – or understanding the development trajectory of – the urban systems

20. In Jacobs (1970 and 1985), for example, one finds a number of theoretical insights that could have been put into use in the explanation of local systems’ development trajectories.21. The crucial methodological shift from ‘space’ to ‘territory’ distinctive of regional economics of the past two decades is extensively discussed in Capello (2004, chapters VII and VIII).22. In urban planning there is a line of thought from Geddes (1915) to Secchi (2005) that has highlighted the features of the spatial organisation of modern cities (also Rödwin, Linch, 1989).

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of Florence, Bologna or Ancona, both from a regional and national perspective, seems in retrospect a rather odd idea.23

There are local systems in the ISTAT’s map that we better treaty for what they indeed are, namely cities. But this map also contains local systems that are rural or mountain systems, often taking the form of networks of very small towns or even of disconnected single towns. Indeed, distinguishing the concept of ‘local system’ from its concrete manifestations in space and time will enable the Italian discourse on local development to take adequate consideration in economics not only of winning areas but also of ‘losing areas’. Italy’s trajectory of economic develop-ment can certainly be characterized by exceptional cases of fast industrialisation, but it would be unbalanced not to give adequate consideration to exceptional cases of economic decline and of ‘development without growth’.

It has already been mentioned that there have been striking differences among local system’s performances in the regions of the ‘Third Italy’. By way of a rough measure, more than 30% of the population of this macro-region still lives in terri-tories that experienced a very sharp population decline in the period 1950-1980 – followed by two decades of economic stagnation. Although the contributions to the national social product and evolutionary potential of these local systems may be negligible, they nevertheless perform a fundamental role in the social and ecologi-cal stabilisation of the territory which should not be underrated. Moreover, in the long-run, the territorial capital which still characterises these ‘marginal’ systems may once again find an economic use (Calafati, 2004 and 2006), and significantly contribute to regional and national development – and also to maintenance of cultural identity. With some exceptions (see, for instance, Boscacci, Senn, 1997), the development trajectories of local systems in the Italian mountain areas have not been an issue addressed by economists. Indeed, none of the above-described research programmes has devoted attention to villages, towns, networks of towns or dis-organized territories in marginal areas.

The small – often very small – human settlements organising the territory in the Apennines and Alps, but also in other remote areas, have developed a peculiar form of territorial integration. Local systems made up of clusters of small municipalities, which assume the nature of networks of towns, are today the most widespread type of territorial units.24 These units are still rather small in terms of population, and even more so in terms of number of employed (activity rates are often quite low when compared with those of other territorial units). In many cases, they have expe-rienced sharp demographic decline linked – as often happens – with rural systems

23. An early and remarkable empirical study on the development trajectory of a city was conduc-ted on the city of Milan – its metropolitan system – in the late Eighties by IRER (1988). In recent years, in the context of formulating the strategic plans of Italian cities, applied research on the structures and performances of cities has substantially increased – without leading, however, to coherent conceptual frameworks.24. For an interesting case-study of territorial trajectories in Italian mountain areas see Compa-gnucci (2002).

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undergoing the initial transition phase toward a more appropriate scale – with an increase in per capita income.

By mapping Italy in terms of local systems it also seems possible to gain better understanding of the organisation of rural and mountain territories by exploring the extent to which they are self-centred in terms of evolutionary potential or depend for the provision of private and public services on nearby urban systems.

7. A Research Agenda

Confronted with the challenging task of explaining local systems’ development trajectories and also, under the pressure of globalisation and territorial competi-tion, with the urgency of designing appropriate development policies for them (and endowed with an array of theoretical insights stemming from diverse social disci-plines), students of regional economics in Italy may be expected to move forward along the new path that has been laboriously opened up. Establishing local systems as the basic unit for territorial analysis has been a methodological breakthrough, which has raised new and challenging theoretical, empirical and policy issues, most of them not yet fully addressed. The theoretical issue has been difficult to address because the introduction of local systems into the conceptual framework has obliged economists to deal with social objects (metropolitan areas, cities, rural and mountain towns and networks of towns) falling largely outside the scope of their discipline. Yet the most significant contributions one finds in the Italian litera-ture on regional development have been achieved at theoretical level. The four research programmes reviewed in the previous pages have yielded a constellation of theoretical insights, which greatly enhanced the understanding of local systems’ economic performances.25

In regard to urban systems, most of these insights can be fruitfully integrated with the findings that have long been forthcoming in the field of urban studies. In regard to other types of local systems, for instance rural and mountain ones, they can be also integrated with the knowledge generated by other social sciences. After two decades of innovative and idiosyncratic theorising on Italian local develop-ment, achieving a ‘theoretical synthesis’ is a major task and should figure promi-nently on the research agenda of Italian regional economists.

The empirical issue has also been difficult to address. The major problem has been the scant availability of data needed to conduct quantitative/qualitative empirical analysis of the structures and performances of local systems, a territorial unit that for not being a ‘legal unit’ could not also be a ‘statistical unit’. At the local system

25. There are two levels of description which have been underrated in the research programmes discussed here. Firstly, the features of the structure characterising a local system and generating its performances over time – structure that evolves in time under the effects of a variety of factors (see Waddington, 1977; Calafati, 2007). Secondly, the description of the ‘environment’ of the local system. The concept of self-eco-organisation (Morin, 1993) appropriately captures the fact that an agglomeration, being an open system, ‘deals with’ an environment – an environment which is specific to it.

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level, the data needed to corroborate the hypotheses put forward in the theorising process were (and still are) simply not available. Census data are important but they are insufficient and, moreover, available with a timing that rules out the possibil-ity of many corroboration processes.26 This state of affairs has wrongly suggested to shift to administrative units such as ‘provinces’ or even ‘regions’ in order to conduct experimental corroboration of theoretical hypotheses. That has generated a blurred scientific landscape: theoretical notions initially proposed in interpretations of the working of local systems have often been tested on structurally rather differ-ent territorial units (provinces, regions). The lack of data on Italian local systems is a major obstacle, one which the scientific community cannot overcome without the support of the state and its statistical agencies – but stimulated by the scientific and policy interest some progress is being made (for instance, ISTAT has started providing database which takes local systems as statistical units.)

Full acceptance of the concept of ‘local system’ in the policy making process has also been hampered in Italy by the fact that it entails profound changes to the spatial organisation of the political system. A straightforward implication of acknowledging ‘territorial coalescence’ is to propose ‘institutional coalescence’. This would lead to a sharp reduction in political-administrative units and/or to the establishment of inter-communal political agencies with political power in (stra-tegic) economic planning and spatial planning. In fact, legislation at beginning of Nineties seemed to open the way to a reform of the political system that would finally grant full institutional recognition of local systems as outcomes of ‘territo-rial coalescence’. However, this institutional reform has proceeded rather slowly, and indeed has practically come to a halt, although it is still prominent on the politi-cal agenda. The necessity to endow local systems with an appropriate regulation system has marked the experience of the ‘New Territorial Policy’, and it is an issue that will very soon surface as critical against the background of ‘territorial competi-tion’ in Europe and the need for a new generation of local development policies.

8. Conclusions

It is certainly not surprising that in Italy, a country that has experienced a profound and extensive change in its territorial organisation (a ‘territorial revolution’) in recent decades, and whose history is marked by dramatic territorial disparities, one finds a scientific community that has extensively and innovatively contributed to the field of study of regional economics. Deeply influenced by the economic and social history of Southern Italy, but also by the dramatic backwardness of other areas in the country, that provoked massive external and internal emigration for almost a century after the formation of the Italian nation state, Italian public opin-ion has been ready to debate the issue of regional and local development. Without this background, linked to the deeply-rooted social value attached in Italian society

26. It should be noted that Italian National Institute of Statistics (ISTAT) has begun to issue data at municipal level on a yearly basis.

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to the viability of local communities, it would be difficult to understand the course of regional studies in Italy. The importance of the concept of ‘local system’ resides in the fact that it seems to have answered most of the questions raised by the ‘terri-torial revolution’ experienced by Italy.

What is instead surprising is the research style that has prevailed in this research field. In fact, one can raise the following question, as a way to conclude this historical-critical survey: from where does the strong interdisciplinary character of so much regional studies carried out in Italy so far derive? This is a difficult but important question to address, because the answer may help in forecasting the future methodological and theoretical avenues pursued in this field of study. Certainly, ‘development economics’, with its important role in exploring the causes and remedies of Southern Italy’s backwardness, influenced the style of research and the emergence of an interdisciplinary research approach. It would be easy to trace many components of the Italian discourse on regional and local development back to scholars such as A. O. Hirschman, G. Myrdal, F. Perroux and D. North, to mention only a few. Moreover, the same Marshallian tradition with its well-known emphasis on ‘external economies’ introduced an eclectic approach to economics that greatly favoured interdisciplinary research. Finally, a practice of trans -disciplinary colloquia characterising many Italian faculties and institute, giving rise in some cases to the establishment of trans-disciplinary research teams, should be considered in explanation of the collaboration among urban planners, sociologists, geographers, political scientists and economists in this field of study in Italy. Certainly, there have been other influences, but those mentioned may suffice to show why the study of regional economic performances has to date been deeply marked by an interdisciplinary approach.

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Scienze Regionali Vol. 8 – n. 3, 2009, pp. 35-58 Thirty Years of Regional Science in ItalyItalian Journal of Regional Science Special Issue

Regional and Local Development

Gioacchino Garofoli*

(Paper first received, April 2009; in final form, July 2009)Abstract

The paper deals with the changing features of regional development in the last dec-ades and the changing research approach to them, seeking to identify the contributions of Italian scholars to the international debate. The ‘regional development divide’ of the 1970s induced Italian scholars to shift to analysis of new models of productive organisa-tion underlying the active role of the territory in the development process. A crucial role was played by the model of industrial districts, which stressed that development can be achieved on the basis of SMEs and on specific local resources. The paper also deals with the ‘local productive systems’ determined by a close interaction between economy, society and territory which produces external economies and collective efficiency. The paper concludes by drawing some policy lessons for backward regions.

Keywords: local system, industrial district, endogenous development, external economies

JEL Classification: O18, O20, O30, R12, R58

Sviluppo regionale e locale(Articolo ricevuto, aprile 2009; in forma definitiva, luglio 2009)

SommarioL’articolo affronta i cambiamenti intercorsi nello sviluppo regionale negli ultimi

decenni e il conseguente cambiamento nell’approccio degli studiosi a questi temi, identificando il contributo degli studiosi italiani nel dibattito internazionale. Il radicale cambiamento delle traiettorie di sviluppo regionale manifestatesi negli anni settanta hanno spinto gli studiosi italiani ad analizzare i nuovi modelli di organizzazione pro-duttiva sottolineando il ruolo attivo del territorio nel processo di sviluppo economico. Un ruolo cruciale è stato giocato dal modello dei distretti industriali che ha evidenziato che lo sviluppo può essere realizzato anche con strutture economiche basate su piccole e medie imprese e che fanno perno su risorse specifiche locali. L’articolo discute, inoltre, il modello di “sistema produttivo locale” determinato da una forte interazione tra econo-mia, società e territorio che produce economie esterne ed efficienza collettiva. L’articolo avanza alcune considerazioni finali con riferimento alle azioni collettive e alle strategie di sviluppo locale e regionale con una prospettiva di sviluppo “dal basso”, con il territo-rio che gioca un ruolo cruciale di regolatore e coordinatore.

Parole chiave: sistema locale, distretto industriale, sviluppo endogeno, economie esterne

Classificazione JEL: O18, O20, O30, R12, R58

* Department of Economics, Insubria University, Via Monte Generoso 71, 21100 Varese, Italy. e-mail: [email protected].

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1. Introduction1

The aim of this paper is to describe the role of Italian scholars over the last thirty years in the analysis of local and regional development, focusing on both the origins of the debate and the main contributions made to it. It will provide a historical overview of the different phases of the analysis, underlining hypotheses and methodologies, as well as the main results of the research.

The paper starts with description of the traditional approach to Italian regional development focused mainly on the dualism of the Italian economy and on the backwardness of the Southern regions. It then moves to the territorial transforma-tions which took place in Italy during the 1970s and 1980s and caused the crisis of traditional paradigms in both economic analysis and regional development theories.

The contributions of Italian scholars have been crucial both in explaining new trajectories in regional development (e.g. new industrial regions) (Scott, 1988) and in introducing a local development approach with the corollary of the interconnec-tion between economic development and territory. From an analytical and theoreti-cal point of view, this has led to rediscovery of industrial districts (Becattini, 1979) as a theoretical background for local development strategies and policies. Analysis of local development experiences and strategies made it possible to research and discuss local productive systems and their typologies.

This complex story of the transformation of regional and local development in Italy has been rather important because it has enabled not only the introduction of the principles and the organisation of a school on endogenous development but also the participation of Italian scholars in the international debate on economic development strategies and policies.

The paper will reconstruct the progress of the analysis of regional development in the past decades, and it will draw some conclusions on collective actions and strategies of local and regional development assuming a ‘bottom-up’ perspective and where the territory performs a crucial role as regulator and coordinator. The territory plays an active role in transforming a geographical space into a network of social relations and interactive actions producing new knowledge and competences; which should then enable the production of public goods and dynamic competitive advantages.

2. From Traditional Approach to the New Regional Trajectories

2.1. Regional Disequilibria and Southern Development Problems

The origin of the classic approach to regional development in Italy was the litera-ture on the Southern question (“questione meridionale”) which comprised seminal

1. I am grateful to Roberta Capello and Enrico Ciciotti for their very valuable comments on a previous version of this paper. I alone am responsible for any errors or omissions.

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works by Giustino Fortunato, Saverio Nitti and Antonio Gramsci. In the post-war period, concern with the Southern question was heightened by the political and social debate on agrarian reform and the creation of the Cassa per il Mezzogiorno, the first development agency introduced in Italy. The scientific debate was animated in that period and saw the participation of scholars from different disciplinary backgrounds (economists, historians, sociologists, geographers) (see the contribu-tions of Sereni, Sylos Labini, Rossi Doria, Romeo, Dorso, Dolci, Compagna). Two important developments in the post-war period greatly influenced the formation of a new generation of regional development scholars: the school opened at Portici (near Naples) with the crucial contributions of Manlio Rossi Doria and Augusto Graziani, and the first experience of community action and social organisation in rural areas launched by Danilo Dolci in Sicily, who worked on a project for devel-opment ‘on the ground’ (and which formed the embryo of local development initia-tives in Southern areas).2

The economic debate in the post-war period was dominated by the classical interpretations of Italian economic dualism put forward by the famous models of Vera Lutz (1958, 1962) and Augusto Graziani (1968). The dualistic interpre-tation of the Italian economy stressed the opposition between developed regions and underdeveloped ones, between modern sectors and traditional ones, between big concerns and small firms. Vera Lutz especially, but also Graziani, envisaged a single development path based on the crucial role of big firms and modern sectors, and where there were no opportunities available for areas and regions based on small and medium-sized firms.

The early 1970s marked the beginning of a period of transition both in the restruc-turing of the Italian economy and in the interpretation of regional development (see Secchi, 1974 and Graziani, 1975). This was a also crucial period for research by the new generation of regional scientists in Italy, which would organise, a few years later, the Italian section (AISRe) of the Regional Science Association Interna-tional (RSAI). Suffice it here to recall the works produced by the school of Portici on Southern regional development (see e.g. Del Monte, Giannola, 1978), those of the Bocconi school linked with Walter Isard and the Regional Science Association International (Camagni, Cappellin and Senn), and those of the group working in Pavia and Venice, which stressed the role of the interaction between economic development and territory (Arcangeli, Garofoli and Latella).

2.2. The Regional Development Divide

At the end of the 1970s and in the early 1980s there opened up a regional development ‘divide’ based on three pillars: a) the analysis of the decentralisation

2. It is important also to mention the scheme in Sardinia launched by the Organisation Européenne de Coopération Economique (OECE) in 1958 with a pilot project called “Progetto Pilota Sardegna”, which used an integrated approach (including training and other accompanying instruments) in opposition to “top-down” regional development policies. Crucial for this project was the field research carried out by Anna Anfossi (see Anfossi, 1968).

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process; b) the discovery of the ‘Third Italy’ and new industrial regions; c) the rediscovery of industrial districts.3. Now examined are the seminal works on these three different yet interconnected issues which modified research perspectives on regional development not only in Italy but in almost all countries.

Productive decentralisation was the first research issue which created a break-down in the traditional interpretation: productive decentralisation from big concerns to small firms and from central areas to peripheral ones in search of cheap labour altered the effective features of the industrial localisation and territorial distribution of firms, giving new emphasis to the second element in the dualistic opposition of the centre-periphery approach. After the first studies on productive decentralisa-tion, novel elements in regional development emerged. Brusco (1975) showed that productive techniques in small firms (and labour productivity) were not radically different from those of large firms, which gainsaid the paradigm of the efficiency of large concerns based on scale economies. Garofoli (1978) showed the ambigu-ous role of productive decentralisation from a territorial point of view in that it was able to allow industrialisation in peripheral and rural areas with weak and marginal sections of the labour supply.

The discovery of the ‘Third Italy’ (Bagnasco, 1977) and of the diffused economy (Bagnasco, Messori, 1975) formed the second pillar in the regional development divide: the existence of a third form of organisation in society and the economy based on small firms and shared values able to produce social mobility and build consensus contradicted not only the dualistic opposition but even the idea that it is possible to follow only one path to development. A body of research on peripheral regional development in Italy used this approach and showed the presence of new industrial regions (see the Allen Scott’s definition) (Scott, 1988). Several studies (Garofoli, 1978, 1981, 1983a, 1984a and 1991b; Arcangeli et al., 1980; Becattini, Bianchi, 1982; Goglio, 1982; Cappellin, 1983) described new features of regional development in Italy, with different performances and new trajectories, and opened international discussion4 on both regional development models (Fuà, 1983) and new kinds of industrial organisations. At the same time the crisis of the large cities led to research on counter-urbanisation and on peripheral demographic growth (Dematteis, 1983).

3. During the 1980s the literature on Southern regional development and on regional disequili-bria was still of huge proportions (e.g. Arcangeli, 1986; Garofoli, 1987; Giannola, 1982; Latella, 1982, 1990a and 1990b) and the literature on regional development in Europe increased (e.g. Camagni, Cappellin, 1984).4. The conference in Durham (UK) in 1982 and the Aegean conferences in Naxos in 1983 and Lesvos in 1985 were the first instances of international debate on new schemes of regional development. It is interesting that these first conferences were attended by the future editors of leading international journals, like Regional Studies, European Planning Studies and Euro-pean Urban and Regional Studies, which devoted a large amount of space to new trajectories of regional development, new industrial regions, and the different territorial forms of production organisation.

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The third pillar of the regional development divide was the rediscovery of indus-trial districts (Becattini, 1979). An industrial district is not just another pathway to industrialisation and development (alternative to the vertical integration of big firms) as already underlined by Alfred Marshall, but it is a veritable local commu-nity of firms, workers and citizen (Becattini, 1989b) which furnishes opportunities to reflect on local economic development and different local models of production organisation.

2.3. The Contribution of Italian Scholars and the Role of AISRe

Several papers on the above issues were presented at the first conferences organ-ised by AISRe, which demonstrates the widespread perception among Italian schol-ars of the crucial role of the three pillars for regional development analysis. Some papers already dealt with this topic in Naples in 1981 and Venice in 1982, but it was especially at the Conference in Florence organised by IRPET (Regional Institute of Economic Planning in Tuscany) in 1983 that the three issues were analysed in depth (see the selection of papers in Bianchi, Magnani, 1984).

Becattini and IRPET (Becattini, 1975) had already addressed – at least implic-itly – the question of the alternative modes of organisation of production and local models of development, showing the opposition (in structure and development trends) between areas with large firms in Tuscany and areas based on small firms and industrial districts. Becattini organised a school on industrial districts at both the Faculty of Economics and IRPET, and the 1983 Conference in Florence was the occasion for launching this research perspective and discussion with other research groups belonging to different scientific disciplines. Several scholars who had participated in the debate on the regional development divide during the second part of the 1970s and during the 1980s attended the conference: Bagnasco, Demat-teis, Garofoli, Camagni, Arcangeli.

Becattini and Bianchi gave a paper (Becattini, Bianchi, 1984) on the new features of regional development in Italy after their famous paper on the topic published in 1982 (Becattini, Bianchi, 1982). Also Garofoli presented a paper on the new distri-bution of economic activities among the Italian regions and on the new models of development (Garofoli, 1984b), underlining both the novelty of the model based on diffused industrialisation and small firms and the crucial importance of endogenous elements in the new development model. Both papers dealt with the inconsist-ency between facts and regional phenomena and traditional theoretical paradigms, emphasising the need for a new theory on local and regional development.

Dematteis presented a paper on counter-urbanisation and the role of urban networks (Dematteis, 1984) which was a complementary analytical item in the new interpretation of the regional development divide. Also Camagni addressed the question of the development and decline of metropolitan areas in their ‘life cycles’ (Camagni et al., 1984).

The AISRe conferences therefore had a crucial role in directing attention to the changing nature and mechanisms of regional development, not only stimulating

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Italian scholars to examine the new territorial questions but also animating the international debate on these issues. Several papers were presented by Italian schol-ars at international meetings and conferences, not only at the Conferences of the Regional Science Association but also, and especially, at small workshops in which the limited number of participants and the specific focus on these issues involved foreign scholars in debating these themes and induced them to conduct analogous research using similar hypotheses and methodologies.

It is important to recall briefly in this section of the paper (because it will certainly be thoroughly analysed by other papers in this special issue) the importance of research on regions and innovation through AISRe’s specific initiatives, starting with the seminar held in Pavia in 1983 (Camagni et al., 1984) and concluding with the summer school organised in Arco in 1988 (Cappellin, Nijkamp, 1990; Ciciotti et al., 1989).

3. Industrial Districts

The rediscovery of industrial districts (Becattini, 1979) and the works of Italian scholars on this theme is of such importance as to warrant an entire article for the special issue of this journal. A handbook on industrial districts has been recently published (Becattini et al., 2009), so that it is possible here simply to point out the role of research on industrial districts in the AISRe’s history and the effects of the literature and theory of industrial districts on local economic development (and on their models, strategies and policies).

A huge amount of papers on industrial districts have been presented at the AISRe conferences since the Italian section of RSAI was first organized and the first papers on industrial districts were given at the Venice and Florence conferences.5

The first book on industrial districts was published in 1983 (Garofoli, 1983a). Curiously, it examined the industrial districts of Lombardy, although this has been usually viewed as a region based on large firms. Several crucial issues were raised in the book: the role of agglomeration economies, the workings of the industrial district model, the main features of industrial districts. Methodological discussion of variables and statistical indicators emphasised that it is impossible to use only indicators based on official statistical data to define industrial districts. The features of the dynamic model were identified, and a typology of local productive systems was discussed. The book was not only important because it was the first compara-tive analysis of diverse industrial districts (28 in the region), with more detailed analysis based on qualitative information collected by means of direct interviews

5. The Florence Conference of 1983 was also the occasion for the official launching of this theme among Italian regional scientists. The Conference of the Italian Society of Economists held in Rome in November 1984 constituted official acknowledgment of Italian economists because a specific session of the Conference was dedicated to industrial districts (Becattini, 1989a). It is important to remember also the Conference held in Florence on the relationships between urbani-sation and industrialisation in areas based on the presence of small firms (see Innocenti, 1985).

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with local firms and intermediate institutions. It was also important for its theoreti-cal interpretation and discussion of local and regional policies to move industrial districts onto a ‘high road to development’ (Pyke, Sengenberger, 1992). It is perhaps no coincidence that a paper on the role of industrial districts and clusters of small firms in Europe was published in the same year by an Italian journal (Garofoli, 1983b) with general discussion of the question and a mapping of industrial districts in the main European countries.6

Methodological perspectives, field research analysis, involvement with local actors in producing a locally accepted interpretation of past trends, future chal-lenges, and possible collective actions to strengthen industrial districts and local productive systems were crucial issues for research on this form of production organisation. Such research adopted an approach which we may call ‘research-action’ and which has also been used in several foreign cases through the involve-ment of scholars belonging to the endogenous development school (see below). In other words, research on the relationship between economic development and territory or on territorial economics (Courlet, 2008) has sprung largely from the detailed analysis of industrial districts conducted by Italian scholars at the end of the 1970s and the beginning of the 1980s.

The main results of the analysis of industrial districts were a change in perspective on economic development and the breakdown of traditional paradigms. The litera-ture on industrial districts showed that small firms (when organised in networks and territorial organizations) can be effective (achieving a level of labour productivity comparable with the values obtained in large firms) and innovative, breaking with traditional interpretative schemes based on a simplistic (and deterministic) view of the principle of scale economies.

During the 1980s a number of seminal articles on industrial districts were published by Italian scholars in international and foreign journals (in English, French, Spanish and Portuguese), and interest in industrial districts began to spread among small groups of researchers in other countries. Various articles and books were published in English (Brusco, 1982; Garofoli, 1989; Becattini 1990 and 1991; Bellandi 1989 and 1994a; Pyke et al., 1990), but publication in other languages was also important, mainly because the presence of industrial districts and the conse-quent attention of scholars were quite high in France, Spain and Portugal.

Of course, several papers on industrial districts were discussed at the AISRe Conferences after those presented in Venice and Florence. It is not possible to mention all of them here, but reference should be made to the attendance of vari-ous scholars of industrial districts at AISRe Conferences in the 1980s and 1990s. Papers on industrial districts were presented by members of the Florence school

6. To be noted is that a previous English version of the paper (presented at the above mentioned Durham Conference) was rejected by an international journal, because neither the referees nor the director understood the significance and the novelty of this issue. The research was underta-ken, of course, with a lack of specific studies in Europe and without appropriate statistical data.

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(see Bellandi, 1994b; Sforzi, 1990) and of other research groups.7 These papers raised further research questions and introduced new methodologies for the study of structural change and transformation in industrial districts (e.g. analysis of trans-formation strategies and internationalisation processes using micro data on firms’ samples). Several articles were then published by Italian scholars in international journals and English books during the 1990s and in this past decade (see Becattini, Bellandi, Belussi, Bianchi, Dei Ottati, Garofoli, Rabellotti, Sforzi).

In conclusion, the model of the industrial district is of major importance for the debate and research on regional and local development because it can explain how different models of development can be followed, even ones based on small and medium-sized firms (SMEs), because the latter, if included in a network mecha-nisms and processes, can be economically efficient and innovative. This made it possible to break with the traditional paradigm accepted by mainstream econo-mists from the 1950s until the 1970s. This model denied the validity not only of a series of theoretical assumptions generally (and often uncritically) accepted (such as those concerning the lack of economic efficiency and innovation in small firms), but also of the rationale of regional development policies (and of development tout court) followed in both developed and developing countries.

4. From Industrial Districts to Local Economic Development

Industrial districts revealed (both theoretically and empirically) the existence of alternative paths of development which could be closely based on the territory’s specific assets: the territory matters, and local development is important.

Analysis of the productive organization of the industrial district and of its social factors sheds light on important new variables in the decisions (on localization, investment, strategies) of economic actors. These variables affect the processes of transformation of the local economy (and society) and consequently of the regional and national economy. Cooperation among firms, relations between the production system and the socio-institutional system, the skills of workers and their involve-ment in the productive organization of the firm and in the area’s wider social model are crucial elements in the development process.

The role of specific local institutions which intervene to remedy market deficien-cies (or ‘failures’), such as technological centres, services centres, training schools, and local development agencies, becomes crucial. In other words, a social system of inter-relations, of circulation of information, of production and reproduction of values, organizes itself to permeate and characterize the mode of production. This means that many crucial factors are historically embedded in the local society and are not therefore easily transferable to other areas: the development process acquires its definitive character as a ‘social process’ by refusing to appear only a technical one.

7. Most notably Bramanti, Rabellotti, Paniccia, Grasselli and Musotti, Mariotti. Also Garofoli returned to this theme at other conferences (see the paper presented in Perugia in 2003).

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In this way, the territory plays an active role in the development process because it includes all the historical, cultural and social factors that form the basis of specific models of productive organization, of the continuous interaction among economic and social actors and, therefore, of the actual processes of economic and social transformation. The emphasis on the territorially anchored organizational model of production hinges on two main dimensions (Garofoli, 1983a and 2003):

the system of production, the relations among firms and, therefore, the social 1. division of labour (aspects such as ways to exchange goods and services, trans-action costs, production costs, increasing returns, dependence or relative auton-omy of supplier firms);the social and institutional base which makes that specific organizational form 2. possible (such as worker consensus and participation; coherence of the strategies of specific local institutions; local policies of support and stimulus; reproduction of knowledge and values; the social investments necessary to reproduce external economies). The next step in the analysis of local and regional development by Italian schol-

ars was the shift of focus from industrial districts to local economic development.8 The literature on industrial districts, as said, prepared the way for analysis of the local bases of economic development and the role of specific knowledge, compe-tences and skills (“specific resources” as defined in the French literature during the 1990s: see Colletis-Pecqueur, 1995), and “governance” through the interaction among local actors and institutions, in allowing specific and coherent transforma-tion paths to be pursued. This was the theoretical basis for differentiation among development paths and strategies, and then for the responsibility of local actors and institutions in managing the transformation of local economy and society. This theoretical basis of the research on local development in Italy differed from the almost contemporary launching of local development analysis abroad, especially in the works of Coffey and Polese (Coffey, Polese, 1984 and 1985).

During the mid-1980s some scholars started to study other areas (belonging neither to large firms nor to industrial districts) to understand the general bases of economic development and the role of territory in this process. This research produced several papers presented at the AISRe Conferences (see e.g. Becchi Collidà et al., 1989; Garofoli, Mazzoni, 1994).

Also the CNR economic research programmes were attracted by this question. In that period, a large amount of research groups were coordinated by Giorgio Fuà to study the territorial bases of economic development. Several groups of schol-ars with different disciplinary backgrounds started to adopt an interdisciplinary approach to this question and obtained original results (Dematteis, 1991; Fabiani, 1991a and 1991b; Fuà, 1991; Garofoli, 1991a).

To be mentioned as well is the significant contribution of Italian scholars to analysis of dynamic local learning and the regional dimension of the innovation

8. Not coincidentally, a book written by Giacomo Becattini in 2000 took the title From Indu-strial Districts to Local Development (Becattini, 2000).

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process. Because another article in this special issue will deal with these topics, only cited here are some seminal works and the participation of Italian scholars in the international debate. Firstly, the concept of ‘technological district’ was introduced by Antonelli (Antonelli, 1986); secondly, Italian scholars played an important role in the European research group on “milieux innovateurs” (GREMI) (e.g. Camagni, 1991; Camagni, Maillat, 2006) although also other scholars analysed the regional dimension of innovation (Camagni, et al., 1984; Camagni, Malfi, 1986; Cappellin, 2000; Cappellin, Nijkamp, 1990; Ciciotti, 1884 and 1986; Ciciotti et al., 1989; Del Monte et al., 1993; Garofoli, Musyck, 2003); thirdly, a number of significant Italian studies were conducted on dynamic local collective learning (e.g. Capello, 1999; Camagni, Capello, 2002).

5. Local Productive System and Endogenous Development

The analysis of industrial districts has engendered debate on crucial aspects of both the local economic and social structure and competitive factors within the national and international division of labour. Industrial districts have thus raised the general question of local development trajectories and the likelihood of alterna-tive paths of development, including models without (or with the marginal pres-ence of) industrial production. There is today a large body of literature on local development models based on agriculture (even with the so-called ‘agro-industry districts’), on tourism (with a variety of models of production organisation and with different degrees of inter-sectoral integration), on cultural activities (e.g. the so-called ‘cultural districts’), on environmental management, and so on.

On turning to the functioning mechanisms of these alternative paths and intro-ducing the discussion on the autonomy of local actors and institutions in the proc-ess of economic and social transformation, we can understand the role played by the concepts of local productive systems and endogenous development. These concepts are important both from an analytical perspective and from the point of view of development policies.

The main goals of local development strategies and policies are the use, valorisa-tion and implementation of local resources (often specific resources, different from the standard ones predominant in mainstream approaches) and the construction of dynamic competitive advantages (to maintain the sustainability and durability of the economic and social organisation) through control over the accumulation proc-ess and innovation.

The approach to endogenous development stems from some seminal works published during the 1970s and early 1980s which enabled a paradigm of develop-ment ‘from below’ (Stöhr, 1981) to emerge. It also links with the literature on terri-torial and ‘agropolitan’ development (Friedmann, Weaver, 1979), on the mobiliza-tion of indigenous potential (Ciciotti, Wettmann, 1980)9 and on eco-development (Sachs, 1977 and 1980).

9. The Berlin group criticized the regional policies based on the attraction of external firms and

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According to the recent literature on this theme (Garofoli, 1991a, 1992 and 2002; Courlet, 2001 and 2008; Vazquez Barquero, 2002), a model of endogenous development guarantees autonomy in the process of transformation of the local economic system, generally assuming the traits of a self-sustaining process of development. The process of transformation is therefore based on local specifici-ties and on the capacity to govern and manage crucial variables. The literature on endogenous development also stems from the failures of the state in regional poli-cies, especially after the collapse of the development poles in Southern European regions.10

Economic development is always simultaneously a process of territorial restruc-turing: that is, it assumes, in many different shapes and forms, a geographic complexion. One of the most important expressions of this link between territory and development consists of dense regional agglomerations of firms and workers (Scott, Garofoli, 2007). Three main conditions determine this link, namely: (a) the existence of specific resources (and assets) that cannot be easily transferred else-where, (b) the emergence of a system logic binding firms, collective actors, institu-tions and workers together into a functioning economic order, and (c) the formation of project capacity, that is, an ability to deal with internal crises and to react to external challenges, which requires, in turn, the establishment of coherent mecha-nisms of local economic governance (Garofoli, 2001; Scott, Garofoli, 2007).

We can describe this kind of territorial development in terms of the theory of local productive systems (Garofoli, 1983a and 2002). The literature on local productive system (LPSs) originated from the analysis of successful industrial districts, but it has continued to evolve in various directions, including an important step forward to consider issues of endogenous development. To be stressed is the success of the concept of ‘local productive system’ in the French literature, especially with the introduction of the term made by Courlet and the school of Grenoble following Garofoli (Courlet, Judet, 1986; Courlet, 1987).

The concept of local productive system (Garofoli, 2002 and 2003) can be gener-alized to any organizational model of economic activity rooted in geographic space and based on the presence of external economies, specific resources, tacit knowl-edge, and mechanisms of social regulation. In this kind of system, the local milieu proposed recommendations on the role of indigenous potential to the European Commission. However, European regional policy reacted with long delay to these suggestions.10. To be noted is that the endogenous development approach received official acknowledgement with two international conferences held in Tunis-Sfax in 1987 and in Scilla (Calabria, Italy) in 1988. Three different groups of scholars were invited to the Tunis and Sfax conference, organised by the Grenoble school: the group working on flexible specialisation (with the presence of Piore and Sabel); scholars working on industrial districts; and scholars working on economic develop-ment with specific knowledge on Asia, Africa and Latin America. The interaction among these three groups and their different methodologies helped the introduction of this new approach. The conference in Scilla was the occasion for a meeting between Northern European and Southern European scholars dealing with regional development. Detailed discussion of experiences of endogenous development in Southern Europe led to a book in English on the topic (Garofoli, 1992).

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stands in crucial relation with a number of interrelated variables, namely (Scott, Garofoli, 2007):

a. Production organization, i.e. the operational structure of the local economic sys-tem, as reflected in rules and modes of management that allow for division of labour among firms. This in turn fosters the formation of productive linkages, social relationships, and cooperation rules. Where trust and loyalty prevail, the costs of inter-firm transacting are significantly reduced. b. Professional skills and competences are reproduced in the local area, both for-mally and informally. Social interaction and learning foster the acquisition of skills, and progressive learning stimulates new interests and abilities, including new entrepreneurship.11 c. Diffusion of knowledge and information (about productive and managerial tech-niques, market outlets, local resources, competencies, and so on). Rules of com-petition and cooperation shape the diffusion of knowledge, on an involuntary basis in the first instance, on a voluntary basis in the second. Knowledge about local business conditions becomes a common heritage, a true public good. d. Structures of social regulation help in solving common problems in the local productive system and in negotiating political tensions. These structures assume many different guises: governmental agencies, intermediate institutions, civil associations, private-public partnerships, and so on. These points introduce the related issue of endogenous development, i.e. the

notion that the local productive system possesses a degree of autonomy in regard to its internal structure and evolutionary course. This degree of autonomy derives from the decision-making capacities of individual and institutional actors in the local area, and from their ability to control and internalize flows of knowledge and information.

A model of endogenous development is, in fact, based on the formation of ‘social capability’ at the level of the community of firms and institutions operating in the local sphere, through the progressive construction of a series of critical regional assets. Four such sets of assets, introduced by Garofoli (Garofoli, 1991a and 1992), are of especial importance in the present discussion:

the first revolves around the - valorisation (i.e. use and implementation) of local resources such as human resources, financial resources historically accumulated at the local level, material endowments, entrepreneurship, professional compe-tences, technological know-how, and so on; the second is concerned with the existence of (and ability to develop) inter- -firm productive interdependences (i.e. production of linkages effects) in the local area;

11. To be stressed is the role of the literature on regional patterns of new firm formation in Italy (Ciciotti, 1986; Garofoli, 1994), which also produced several papers presented at the AISRe and RSAI conferences. The research outcomes on regional distribution of new firm formation highlight the crucial role of existing agglomerations of firms in fostering the creation of new entrepreneurship (Garofoli, 1994).

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the third involves control of - dynamic learning and innovation processes (i.e. reduction of X-inefficiency, introduction of new techniques and capacity to in-troduce new products); the fourth is focused on the capacity to guide the process of accumulation at the -local level, transforming financial resources into productive investments.To be sure, endogenous regional development does not imply regional closure

or imperviousness to external influences. On the contrary, it goes hand-in-hand with the insertion of the local productive system in a wider economic environment (which implies progressive relations with the outside) with multiple local impacts (new technologies, market shifts, national legislation, and so on). Endogenous development, in fact, means (Garofoli, 1991a and 1992) a capacity to transform the social and economic system; capacity to react to external challenges; capac-ity to introduce specific forms of local-level social regulation that support these two processes. Endogenous development, in short, is the ability to valorise local specific resources and knowledge and to internalize external knowledge; it is the capacity to innovate and produce ‘collective intelligence’ at the local level.

Endogenous development, in other words, simply concerns those elements of the productive system that, by reason of their collective order and mutual synergies, possess certain powers of local social choice and self-determination.

6. Typologies of Local Development Models (and LPSs)

The literature of the late 1980s and early 1990s addressed the question of the types of local models of development, and scholars sought to identify diverse kinds of local productive system. The objective of the discussion on types of develop-ment is not the exhaustive elaboration of all possible models of local development. Rather, it is to allow a plurality of development models to emerge and reveal the potential bifurcations of processes of transformation and the roles (and responsi-bilities) of local social actors in controlling these transformations of local social and economic systems. This highlights the key role of forms of social regulation introduced (and that can be introduced) at the local level, and of local development policies.

The aim of constructing a typology of local development models is to provide local and regional policy makers with guidelines so that they can have benchmark references for actual local areas in relation to theoretical development trajectories. The construction of a typology requires a specific approach with modest theoretical objectives but with great emphasis on its potential impact on decision makers.

Also in this literature Italian scholars have anticipated the international debate. The first typology was introduced in 1983, although it mainly served to single out some distinctive features in the economic structure and trajectories of industrial districts (Garofoli, 1983a). Thereafter, however, research by the already-mentioned CNR research group coordinated by Giorgio Fuà produced a more general account (with nine different types of local development) in 1988, and a paper was presented

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both to the first workshop of the “Joint Programme on Regional Studies in Southern Europe” established on the initiative of Riccardo Cappellin and held in Rhodes (April 1989), and then to the ERSA Conference in Cambridge in August 1989 (Garofoli, 1990 and 1991a).

Three important papers were subsequently published: Storper and Harrison worked around the concept of core and ring with four main typologies (Storper, Harrison, 1991); Leborgne and Lipietz took account of the typology introduced by Garofoli in 1983 to develop three typologies of agglomerations of firms (Leborgne, Lipietz, 1992); Markusen draw attention to ‘sticky places’ with four typologies (Markusen, 1996).12

After the resumption of the question in recent years, especially in the discussion on small-firm clusters in less developed countries (LDCs), the typology of local productive systems, following Garofoli (1983a) and Leborgne – Lipietz (1992), has been summarised as follows (Garofoli, 2007):

clusters of small firms - as specialised areas with static competitive advantages (agglomeration of specialised suppliers in an area with low wages) and weak ties among firms and lack of control on final markets; - local productive systems, with a division of labour among firms and continuous production of professional competences; interaction and learning become stra-tegic factors and allow a progressive shift towards the introduction of dynamic competitive advantages; - system-areas with effective territorial integration networks, with the presence of complementary firms enabling the introduction of new knowledge and in-novation. Voluntary decision-making and partnerships for transformation and innovation, the introduction of collective actions, and effective local state inter-vention are able to produce dynamic competitive advantages. The large part of clusters in developing countries are included in the first typol-

ogy, whereas the large part of industrial districts in Italy and in Europe are included in the second one. The last typology comprises numerous different areas following the ‘high road to development’ (Pyke, Sengenberger, 1992), such as innovative industrial districts, local innovative systems, and technological poles.

Discussion of typologies is of great importance for the identification of strate-gies for local development, and especially in the recent debate on less developed countries (LDCs). This approach, in fact, can foster reflection on the autonomy of the local economy, on up-grading paths and opportunities, on the employability of the labour force, on innovation introduction, and self-sustaining development processes. This may then help in singling out goals and tools with which to launch effective strategies of local development. It also means that the Italian scholars working on local and regional development have recently joined the international debate on economic development theories and strategies.

12. There is insufficient space for detailed discussion of the differences in interpretation among these scholars, but it is important to underline the widespread use of this approach among Italian scholars (e.g. Bellandi, Sforzi, 2001).

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7. Actions and Strategies of Local Development

7.1. Local Development Policies and Strategies: a General Overview

The literature on local development strategies and policies burgeoned in Italy during the mid-1990s, when policies and tools for local development were intro-duced, starting with the ‘negotiated planning’ law and the introduction of territo-rial pacts as the first specific tools for local development policy. It is necessary, however, to recall the research on local development which began in Italy during 1970s and placed strong emphasis on policy interventions and on local economic restructuring. During the 1980s a large body of literature started to examine decen-tralised development policies and strategies mainly devoted to enhancing the ‘high road to development’ in industrial districts.13

There is insufficient space here to discuss all the questions arising in the analy-sis of local development strategies and policies. However, mention should at least be made of research which directed analysis towards capability empowerment for local development strategies among local actors and which then introduced the research-action approach. This approach is rather common among the schol-ars of endogenous development and it is especially important in LDCs, as will be explained below.

It is now possible to make some final statements organised into two sections. The first section will deal with the role of territory as a regulatory tool; the second will deal with guidelines on local development policies and strategies to be drawn from the specific literature produced in recent years.

7.2. The Role of the Territory: a Regulatory Tool

The impact of local development analysis and policies is crucial also in light of more general issues, particularly because they show that territory and the mesoeco-nomic level are strategic assets for development strategies at national scale (Scott, Garofoli, 2007). Coordination and the capacity to mobilize knowledge, professional and technological competences, decision-making processes and actors’ behaviour for economic development, especially in LDCs, depend closely on this kind of approach, which makes it possible to transform general economic development objectives into strategic actions involving different actors and institutions (both private and public).14 The lack of capability in economic development strategies is

13. It is not possible to itemize the huge amount of papers published in Italy since the mid-1970s. However, it should be pointed out that the first book on local development policies was published in 1988 (Cappellin, Garofoli, 1988), and mention should be made of a few examples of papers – published in English – on policy interventions in industrial districts (Bianchi, 1990; Brusco, 1989; Garofoli, 1990 and 1991c) and presented at specific conferences on local development policies (Garofoli, 2001; Becattini et al., 2001).14. On the relationship between the evolution of regional development theories and the introduc-tion of new tools and instruments for policy intervention see Ciciotti, Rizzi, 2005.

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generally due to the incoherence between national goals and the means introduced to mobilize resources and competences into an effective economic process, with induced and multiplier effects as the consequences of a plurality of connected deci-sions and investments. All this requires both horizontal coherence (among different local actors) and vertical coherence (among different levels of government; i.e. along the institutional “filière”). It is this that perhaps explains the success of the local (and endogenous) development approach in several LDCs.

The success stories of local development are numerous, and they exhibit very different economic structures and different strategic items and tools in solving problems, launching local initiatives and transforming economic and social proc-esses. Diverse cases of industrial districts can be found, especially in Southern European countries, as well as some interesting cases of technological poles and cases of transformation and improvement of the quality of life in rural areas (see Garofoli, 2002), even in LDCs (Schmitz, 2004). The huge number of analyses on the role of clusters and networks in emerging countries and the increasing adoption of development strategies in these countries (especially in Latin America but also in the other continents) explain the importance of local development even for achiev-ing effective results on more general objectives of economic development. On this specific research subject, too, the role of Italian scholars has been significant, espe-cially because they have been able to conduct comparative research in different countries (Rabellotti, 1995 and 1997; Garofoli, 1996; Guerrieri et al., 2000).

It is often possible to identify in success case-studies a logic of planning of territorial integration and intense orientation to the use and valorisation of local (mainly human) resources. In light of the above, the idea of diffusing and multi-plying ‘good practices’ to solve economic and social problems in other areas is gathering momentum. At the same time it is important to gain a correct perception of the different tools and schemes of development strategies and policies by look-ing at successful European schemes (like Leader, Urban, Interreg programmes) and the new ones introduced in some countries (like territorial pacts and territorial integrated programmes), which resume some seminal concepts in the literature on local development.

This explains the importance of international comparison among local develop-ment experiences not only by conducting specific studies but especially by organis-ing international meetings with the presence of local actors and practitioners, and holding international continuing training courses to foster the multiplication of best practices. The national associations of Regional Science have also been involved in the organisation of meetings for this purpose.15

15. See the meeting organised by AISRe in cooperation with the French, Spanish and Portuguese associations and held in Caltagirone in 2003, and the meeting on “Local Development Policies and Strategies in the Mediterranean Basin” organised by the Association of Neo-Latin Econo-mists (AENL) in Alghero in 2006.

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7.3. Local Development Policies and Strategies: Some Guidelines

The main objectives for local development (and also for local development agen-cies) are the improvement of existing firms (i.e. an increase in labour productivity, improvement in the human resources used, improvement in the strategic capabili-ties of firms, a better positioning on national and international markets), and the creation of new enterprises (to improve firms’ density, encourage the diffusion of knowledge and the imitation of success stories, and build complementary linkages between firms and total employment, i.e. better use of existing resources).

This may clarify why, in spite of the increasing role of local development poli-cies introduced since the late 1980s at national and supranational level (see the European schemes, IADB, UNDP and other international organisations schemes), the results in promoting effective development have often been unsatisfactory, inducing the failure of local development initiatives. Very often, in fact, the mobi-lization of local actors and institutions was organised to obtain financial support, whereas it should be organised to realize the solution of crucial local economic and social problems, through the direct involvement of local actors and the construction of capability empowerment.

This highlights the importance of the capacity to single out goals and opportu-nities for the local economy and society, through the capability of understanding the relative position of the localities within the international arena. The second necessary condition for the launching of effective local development strategies is the capacity to animate local actors and mobilise resources, mainly those that are unused or badly used, as emphasised by Hirschman in his seminal work (Hirschman, 1958).

The concept of ‘local productive system’ is crucial here because it introduces a system logic into the interaction of a large quantity of private economic actors and collective and public parties, thus helping in the design of development trajecto-ries, alternative strategies and transformation paths. Very often the introduction of strategic planning procedures, which may even assume the form of decentralized social negotiation, heightens the effectiveness of local development strategies.

Some final comments will now be presented as methodological guidelines of sorts. Used indirectly in the foregoing discussion have been some crucial concepts of development theory and strategies which should perhaps be clarified. An effec-tive local development process is based upon five different conditions (Scott, Garo-foli, 2007):

the existence (and continuous production) of Hirschman’s backward and for- -ward linkages effects: complementary relationships and increasing division of labour are therefore crucial variables;the organisation of territorial integrations will produce cumulative effects -through multiplier mechanisms;the achieving of a critical mass of economic activities (the local version of Ro- -senstein-Rodan’s ‘big push’), which emphasizes the role of agglomerations;

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the coordination and capacity to introduce problem-solving interventions through -collective actions;the mobilisation of sequential and coordinated investments able to modify the -profitability and feasibility of different investment decisions. In conclusion, local development strategies and policies are a crucial tool for the

valorization of existing resources and the achievement of collective goals even at national scale. Without the capacity to mobilize resources and professional compe-tencies and, without the coordination of different actors at the mesoeconomic level, it may not be possible to obtain high social and economic performances at national level. That is to say, national economic competitiveness and the quality of life at national level depend on the capacity to realize effective local development strate-gies in the best part of national territories.

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Scienze Regionali Vol. 8 – n. 3, 2009, pp. 59-80 Thirty Years of Regional Science in ItalyItalian Journal of Regional Science Special Issue

Macroeconomic Regional Growth Models: Theoretical, Methodological and Empirical Contributions

Roberta Capello*

(Paper first received, February 2009; in final form, June 2009)Abstract

Macroeconomic regional growth models have experienced many advances have been achieved for what concerns both the theoretical and the methodological approaches, the former moving from constant to increasing returns models, the latter from a-spatial to spatial techniques. Many italian original contributions can be found in the vast lit-erature in this field, which witness the active role played by italian scholars and by regional scientists, in particular. Original contributions in Italy cover both theoretical issues, like the definition of regional competitiveness, or advances in the new economic geography, as well as methodological issues. This wide spectrum of italian original contributions also covers empirical analyses with innovative statistical methods. The paper ends in a prospective way, by highlighting future research directions that should be followed by italian scholars.

Keywords: macroeconomic regional growth models, theories and methodologies

JEL Classification: R10, R11, R15

Modelli macroeconomici di crescita regionale: contributi teorici, metodologici ed empirici

(Articolo ricevuto, febbraio 2009; in forma definitiva, giugno 2009)Sommario

Importanti avanzamenti concettuali e metodologici sono stati sviluppati nei modelli macroeconomici di crescita regionale, i primi attenti ad introdurre rendimenti crescenti nei meccanismi di crescita, i secondi a evolvere da approcci a-spaziali a tecniche in cui lo spazio è concepito come continuo. Molti studi di scienziati italiani hanno con-tribuito all’evoluzione delle conoscenze in ambito sia teorico, sia metodologico, con approcci innovativi che testimoniano il ruolo degli studiosi italiani, specialmente di scienze regionali, in questo ambito. Lo spettro di contributi si muove sul fronte teorico, nel quadro di definizione del concetto di competitività regionale, negli avanzamenti nel campo della nuova geografia economica, così come sul fronte delle metodologie. Que-sto lavoro rappresenta una rassegna dei contributi innovativi apportati dagli studiosi italiani in questo importante ambito scientifico.

Parole chiave: modelli macroeconomici di crescita regionale, teorie e metodologie

JEL classification: R10, R11, R15

* Department of Management, Economics and Industrial Engineering, Politecnico di Milano, Piazza Leonardo da Vinci 32, 20133 Milano, Italy, e-mail: [email protected].

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1. Introduction

The success of macroeconomic regional growth models in the early 1950s was due to the simple conception of uniform space, which enabled the use of already existing macroeconomic models to interpret local growth phenomena. A region was in fact conceived as an area of limited physical-geographical size (largely matching administrative units) considered to be internally uniform and therefore synthesiz-able into a vector of aggregate characteristics of a social-economic-demographic nature.

The early models required the analyst to exclude any mechanism of interre-gional agglomeration and increasing returns, to disregard location theory, to ignore the advantages of local proximity, and instead to assume unequal endowments of resources and production factors, unequal demand conditions, and interregional disparities in productive structures as the determinants of local development. Since then, deep theoretical achievements have taken place thanks to more advanced mathematical tools for analysis of the qualitative behaviour of dynamic non-linear systems (bifurcation, catastrophe, and chaos theory) together with the advent of formalized economic models which abandoned the hypotheses of constant returns and perfect competition. These advances made it possible to incorporate agglom-eration economies – stylized in the form of increasing returns – into elegant models of a strictly macroeconomic nature. The reference is in particular to the models of ‘new economic geography’ and ‘endogenous growth’.

The aim of this paper is to highlight the role italian scholars have played in this conceptual evolution.

As we will see, original contributions that over the last thirty years have come from italian scholars have taken place in the theoretical field, as well as in the meth-odological techniques and in the empirical approaches. The paper treats all these issues in the next three sections. Some future research directions are highlighted in the last section.

2. Theoretical Contributions

2.1. About Regional Competitiveness

Macroeconomic regional growth models have been conceptualized since the beginning with the aim to explain regional growth dynamics. In regional growth, theories and models seek to explain, given a certain quantitative and qualitative distribution in space of resources and activities, the capacity of a local system – whether a region, a city, a province, or a geographical area with specific economic features – to develop economic activities or to attract new ones from outside, and to generate local well-being, wealth and enduring growth.

No single definition has been given to the concept of regional growth. Rather, the various theories on the subject pertain to three ‘philosophies’ which have interpreted

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economic dynamics. The first, that of the classical (and neoclassical) economists of the eighteenth and nineteenth centuries, interprets the growth process in terms of productive efficiency, of the division of labour in a Smithian sense, and of produc-tion factor productivity, and hence examines the dynamics of wages, incomes, and individual well-being. In regional growth theories, this philosophy is applied in neoclassical growth models which seek to identify the economic mechanisms that enable a region to move out of poverty, start a growth path, and ensure a certain level of well-being and per capita income for its inhabitants.

The second philosophy adopts a short-term view of growth and concentrates on the exploitation of given and unused capital resources and of large labour reserves. This is a typical view of keynesian models which, under the assumption of unused production capacity (capital stock) and large labour reserves, interpret regional growth as driven by growing demand for locally produced goods which exerts an income multiplier effect through increases in consumption and employment.

The third philosophy – the most modern of them – interprets the growth path as a problem concerning competitiveness and long-term dynamics and therefore takes the constant innovation of an economic system to be essential for development patterns. Regional growth models based on this philosophy investigate the local conditions that enable the economic system to achieve high levels of competitive-ness and innovativeness and, more crucially, to maintain those levels over time. Growth is defined as an increase in a region’s real production capacity and its abil-ity to maintain that increase. This conception is adopted by present-day theories and models of regional growth.

It is on this last kind of theories that interesting theoretical contributions have been developed in Italy. In 1985 for the first time, Roberto Camagni and Riccardo Cappellin provide a definition of regional competitiveness based on productivity gains achieved through intra-sectoral, differential productivity gains and, more importantly, through a process of sectoral reallocation. Regional sectoral composi-tion was at that time interpreted as the main source of productivity gains since it affects the regional aggregate pace of technical progress. In their EU study on sectoral productivity and regional growth, the authors explain that sectoral produc-tivity is only part of the story; region-specific, intersectoral factors determine the mobility of resources and horizontally affect all sectors located in an area. Material and non-material assets (the latter recalling trust, sense of belonging, cooperation, i.e. the ones highlighted by the industrial district paradigm) affect the capability of local firms – despite their sectoral belonging – to fully and efficiently employ the resources which are available locally, and therefore affect productivity (Camagni, Cappellin, 1985).

The debate on the definition of regional competitiveness and on the identifica-tion of the theoretical micro-economic mechanisms on which regional competitive-ness works is still at the forefront of scientific issues in regional growth. Regional competitiveness has been seen as an elusive concept given the different definitions provided, namely; (i) an increase in the export-base of the region, focusing on export performance (Storper, 1997; European Commission, 1999; Rowthorn, 1975); (ii)

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an increase in factor productivity (Krugman, 1998; Porter, Ketels, 2003). The two approaches seem even contradictory. The former requires an increase in the ratio between the general level of import prices and the level of export prices expressed in a common currency; competitiveness in fact increases when the denominator is reduced (due to a devaluation or a reduction in export prices) and tends to generate growth in exports (in volume) and employment. The latter is based on the opposite relationship (export prices on import prices), i.e. the terms-of-trade since the basic idea that increasing the efficiency of the export sector means being able to import the same amount of goods employing a lower quantity of local resources (it is mainly the case of process innovation), or to import more with equal utilization of local resources. In this case a reduction of export prices, and therefore an increase in competitiveness, result in a reduction of welfare.

Linked to the definition of regional competitiveness is the provocative argument put forward by the eminent economist Paul Krugman, who claims in favour of the general validity of the ricardian comparative advantage principle and against the utilisation of a competitive advantage principle for countries. “Competitiveness” would be a wrong and misleading concept in this context.

The italian contribution to this debate is rather important. On the definition of regional competitiveness, Camagni suggests that: “the conflicting situation can be resolved by turning to a different measure of competitiveness: if it is true that “it is better to sell with prices rising rather than falling” and that the problem consists in dealing with the expected fall in demand in a situation of rising prices, the answer, both conceptual and operative, is of increasing the attractiveness of local products by taking action on innovation, thereby breaking the static context, both conceptual and operative, of price competition. We thus come up in favour of a concept of non-price competitiveness” (Camagni, 2002, pp. 2399).

On the economic mechanisms behind regional competitiveness, Camagni states that an appropriate reply to Krugman’s position has not been found since different territorial levels of analysis have been mixed up, as if the same economic “laws” could apply equally for cities, regions and nations. Starting exactly from this latter point, Camagni highlights that regions differ from countries in that they compete on the basis of an absolute advantage in presence of exogenous shocks, since the adjustment processes which restore equilibrium in international trade, at the basis of the principle of comparative advantages do not work in the same way at national and regional level: in a region, wages and prices are not sufficiently flexible and exchange rate movements are not applicable by definition. The starting-point is the observation that, although the Ricardo model yields the result that trade is always in the interest of a country, it actually occurs only if there are absolute advantages in commerce between economic actors which compare the (absolute) prices of a good in the two countries, given a certain exchange rate. In the higher-productivity country, wages are necessarily higher than in the less efficient country, where factor remunerations are defined on the basis of lower levels of productivity and overall output. It is logically likely that productivity gaps will be on average perfectly

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off-set by wage gaps (calculated in the same currency) – which demonstrates that comparative advantages are also absolute advantages (Camagni, 2002).

An additional contribution in the field of regional competitiveness developed by italian scholars relates to the theoretical idea that in order to explain regional (local) competitiveness an emphasis has to be put at the same time on both endogenous elements (entrepreneurial capability) and external (macroeconomic and macro-territorial) conditions (Cappellin, 1983; Camagni, Capello, 1990). This interpreta-tion allows to overcome the circular reasoning of endogenous approaches (“there is industrial development because there is entrepreneurship”) and to be able to reply to the question “why now and not before?”. In other words, this approach allows to overcome one of the limits of endogenous development theories presented in the previous chapter, which had an evident tendency to emphasise the novel and to undervalue the findings of previous theories, as often happens at the moment of a ‘catastrophic’ break with already-existing approaches; they put in fact a pronounced emphasis on endogenous aspects and disregarded entirely the contextual, inter-regional and objective elements that accompany a development path, in particular the macroeconomic and macro-territorial conditions which act upon the economies of individual areas. The influence exerted by these elements on the birth, develop-ment and crisis of district areas is undeniable. In the early 1970s, for example, the manufacturing and exporting difficulties of the large industrial areas in Italy led to general medium-period exchange rate weakness, and to a decrease in the cost of labour (expressed in international currency), which worked mainly to the advan-tage of the North-East and Central (NEC) regions because of their specialization in labour-intensive ‘tradeable’ manufactures with greater elasticity to price. The same situation arose in 1992, when the general weakness of the italian economy, together with instability in the european financial markets, induced the italian economic policy authorities to heavily devalue the lira outside the ‘monetary snake’ bands, taking Italy out of the european monetary system.

Camagni and Capello build a theoretical model in which both spatial interdepen-dence and feedbacks that take place over time may be summarised in the concept of a region’s ‘relative locational advantage’. This is measured by means of two indica-tors – productivity defined in the broad sense as the overall efficiency of the local social-productive system, and the cost of labour, also defined in the broad sense as the cost of ‘labour force reproduction’ – which are used to determine all the socio-environmental factors that affect the real purchasing power of wages in each region. Applied to the italian case, relative locational advantages of the three italian macro-regions highlight very clearly the favourable conditions enjoyed by the NEC regions during the 1970s, and the contemporaneous loss of competitiveness by the North-West. Comparison between productivity and cost of labour evidences the economic revival of the ‘central’ regions in the 1980s and – more interestingly – the crisis of relative competitiveness that hit some regions, especially those of Central Italy: a crisis which was neither foreseen nor explained by industrial district theory (Camagni, Capello, 1990).

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Lastly, but on similar mind, a recent contribution opens the way to a theoreti-cal/empirical explanation of total productivity differentials among regions (and consequently to regional growth differentials): the concept of territorial capital, a new and fruitful concept which enables direct consideration to be made of a wide variety of territorial assets, both tangible and intangible, and of a private, public or mixed nature. These assets may be physically produced (public and private goods), supplied by history (cultural and natural resources, both implying maintenance and control costs), intentionally produced despite their non material nature (coordi-nation or governance networks) or unintentionally produced by social interaction undertaken for goals wider than direct production (Camagni, 2008). A first appli-cation of the concept is provided in a recent regional growth model, the MASST model (see section 3.1).

2.2. About Interregional Convergence vs. Divergence

It was usually the case to present – even in textbooks – a real dichotomy between regional growth theories based on convergence and those based on divergence: ranged on the convergence side are theories originating within the neoclassical paradigm and which interpret (in their initial formulation) development as a proc-ess tending to equilibrium because of market forces. In equilibrium, not only is there an optimum allocation of resources but also an equal distribution of the production factors in space which guarantees, at least tendentially, the same level of development among regions. On the divergence side stand theories of Keynesian origin which, by introducing positive and negative feedback mechanisms and the cumulative attraction and repulsion of productive resources respectively in a coun-try’s rich and poor areas, envisage not only the persistence but also the worsening of disparities among regions.

From the theoretical point of view, decisive advances have been made in analys-ing regional growth, and the traditional distinction, indeed a dichotomy – often drawn in regional economics textbooks – between convergence and divergence theories has been now superseded.

In fact, in recent times, more refined mathematical and modelling tools have demonstrated that the same theories are able to explain both divergence and conver-gence. By introducing, for example, scale economies and agglomeration econo-mies into a production function – obviously more complex than that of the 1960s model – the neoclassical model successfully simulates a series of behaviours and tendencies, both continuous and ‘catastrophic’, very distant from the mechanicism and univocity of the convergence predictions of the original neoclassical model. In the same way, the divergence yielded by Keynesian models (à la Myrdal and Kaldor in particular) is called into question if the model’s dynamic properties are analysed: according to the parameter values of the dynamic equations describing the model’s economic logic, the local system either converges on a constant growth rate or explosively or implosively diverges from it.

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It is therefore possible to conclude that there are no longer grounds for any dichotomy to be drawn between theories of convergence and divergence, between optimistic theories and pessimistic ones. The role of italian scholars in this issue has been to bring this new interpretative framework to the attention of scholars, students and specialists, by launching two textbooks (one in Urban Economics, one in Regional Economics) refuting the traditional distinction and incorporating the new modelling regional growth models (Camagni, 1992; Capello, 2007a).

Moreover, in the latter textbook a kind of prejudice – accompanying the distinc-tion between divergence and convergence theories in the history of regional economics – has been overcome; the idea that regional neoclassical growth models were only inclined to explain convergence trends. In her textbook, the author of this paper explains something so far not stressed neither in the scientific literature nor in the textbooks; i.e. the attempt made by the famous neoclassical economists of the sixties, Borts and Stein, to explain constant divergent trends between regions through the implementation of a model (the famous two regions – two sectors model) in which they demonstrate that if two regions start from the same level, and one grows more than the other for external shocks, there is a tendency for regional growth rates to diverge, thanks to a typical cumulative mechanism. The shortage of capital due to internal saving, calculated as a share of disposable income and guar-anteeing high remuneration of this production factor, stimulates a constant inflows of capital from outside, and a constant region’s growth rate persistently higher than that of other regions, a result which is far from the convergence trend always asso-ciated to these authors (Capello, 2007a).

2.3. About the New Economic Geography

Recent theoretical advances in regional macroeconomic growth models are related to the advent of the New Economic Geography (now on NEG). A predeces-sor of the main ideas developed by Krugman and his school in 1991 is Riccardo Faini with his contribution on “increasing returns, non-traded inputs and regional development” published in the early 1980s in the Journal of Economic Literature (Faini, 1984).

Faini’s work has early intuitions of what some years after would have become the basis for NEG. The model presented in Faini’s paper incorporates for the first time the impact of scale economies (increasing returns at the industry level) on the process of growth in a two-region (north and south) context, by relaxing some assumptions which were typical of macroeconomic growth models of that time: Faini does not rely on the assumption of perfect competition, and – being able to get rid of this assumption – he is also able to avoid the assumption that increasing returns are external to the firms. In his model the latter occur in the production of non-traded inputs and not in the traded industrial sector: “this apparently innocu-ous modification – as Faini wrote – has far reaching consequences for the sectoral pattern of investment in each region” (Faini, 1984, pp. 308).

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In his two-sector, two-region model, Faini demonstrates that the existence of increasing returns to scale in the production of non-traded intermediate inputs gives rise to a cumulative divergence of regional growth rates; increasing returns explain, for the first time in a formalized way, cumulative regional growth patterns. His abstract model was able to explain some empirical observations, like the patterns of early industrialization in backward regions. Backward regions often witness the location of vertically integrated sectors (petrochemical, steel), i.e. sectors which manage to reduce to a minimum their connections with the local environments thanks to a very low input requirement from the service sector; this element helps to explain the low multiplier effects resulting even from a large industrialization effort in a backward region.

Exploiting the formalization of the imperfect competition model, some years later Krugman and his followers produced elegant economic growth models which incorporated the location choices of firms. These were made to depend on three economic factors – transport costs, increasing returns, and migratory flows – which determine, according to the values that they assume, the existence of agglomera-tive phenomena (what Krugman calls ‘geographic concentration’) or diffusion processes. When the concentration of productive activities prevails in an area, the conditions for cumulative local growth are generated (Krugman, 1991).

Within macroeconomic approaches to regional growth this school of thought achieved considerable success and acclaim in the academic community because it showed that territorial phenomena can be analysed using the traditional tools of economic theory (optimizing choices by individual firms and people). NEG conceived growth as an endogenous growth generated by counter-posing dynamic growth mechanisms with increasing returns and transportation costs, thus reprising the economic-locational processes analysed by location theory.

In Italy, this stream of thought has developed quite successfully within main-stream economists, although the number of italian scholars actively working in this field is relatively contained with respect to other european countries, like Germany and UK. If one looks into the scientific work of our italian scholars in this field, what is remarkable is that despite the relatively limited number, the creative think-ing touches most of the different aspects in the field; theoretical advances, empiri-cal evidence and normative implications of NEG approaches have been developed with much degree of innovativeness.

For what concerns theoretical insights, a novel application of NEG is in the field of local districts; in Basevi and Ottaviano (2002) a local district is defined as a location that hosts a large number of small firms which produce similar goods for export and take advantage of the localized accumulation of skills embodied in the resident labour force. In a typical NEG framework, the growth of the local district, characterized by positive local spillovers sustaining endogenous invention of new goods by profit-seeking firms, depends on the crucial choice of firms, after inven-tion, between reaching distant markets by export or plant delocation. Due to local technological spillovers from plants to R&D laboratories, the choice of firms to locate production facilities abroad to circumvent trade barriers through delocation

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decreases the rhythm of innovation and harms the welfare of the district (Basevi, Ottaviano, 2002).

Original applied work has been developed on the micro-economic foundations of market potential and the relationship between market potential and firms’ location choice identified by Fujita et al. (1999), using data for the italian provinces (Mion, 2004). Another important field of innovative empirical research is in the line of the theoretical model of Baldwin and Okubo (2006), in which plants of different size and of different productivity are combined with their geographical patterns; Mion, with the co-authorship of Lafourcade, investigates whether the geographic distribution of manufacturing activities is related to plant size. Using a number of years of italian census data on manufacturing industries, at varying geographic and industrial scale, Lafourcade and Mion find that small plants are more agglomerated than large plants (Lafourcade, Mion, 2007).

A remarkable contribution has been given by Ottaviano (2003) in highlighting the normative implications of the NEG framework. This contribution is a landmark in the history of NEG, since for the first time a list of possible normative implica-tions – not free from criticisms – has been highlighted from theoretical models, highly criticized for their abstraction. Six key policy implications are listed by Ottaviano in his contribution, the most important of which is that all sorts of non-regional policies can have “regional-side effects”, since each policy impacts on the location of economic activity, and thus on the geographical distribution of wealth. The interesting aspect is that Ottaviano himself provides in this paper the limits of NEG approaches, and warns about the use of NEG for policy issues when the limits are not clearly taken into considerations. It is on these limits that Ottaviano rightly envisages future research directions for NEG (Ottaviano, 2003).

3. Methodological Contributions

3.1. Econometric Regional Growth Forecasting Models

Regional growth models find a very useful methodological application when they are applied as the basis for econometric model specifications. Regional econo-metric models began as further elaborations of macroeconomic models dealing with such variables as production, investment, consumption, and exports (Nijkamp et al., 1986; Hewings et al., 2004). In these approaches important attempts were made to translate econometric models interpreting economic growth of national systems into regional econometric models (Glickman, 1977 and 1982).

Also in Italy, as in other countries, the interest in regional econometric models took place in the 1970s. In this period, a group of economists at the University of Ancona developed an econometric model for the italian economy (Fuà, 1976), but at the regional level one records the first regional model by Riccardo Cappellin in the middle of the seventies (Cappellin, 1975 and 1976). The peculiarities of his first model, a stand-alone model for Lombardy, were for that time innovative: the

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model was “generative” in substance because, while national variables were given as exogenous, no constraint was imposed on the region’s growth in order for it to be coherent with the nation’s growth. The region’s economy could grow according to the amount of resources it owned, as well as to its overall efficiency: nothing could limit the region’s growth and, in the multiregional version of the model, there was no mechanism to ensure that the sum of the incomes of all the regions within one nation (which were not explicitly modelled) would be equal to the national GDP. The model was also built on a strong interdependence between regional and national economies, and kept both supply and demand elements of growth into consider-ation. Moreover, in its first version the model contains a sectoral breakdown for ten industrial sectors; this accuracy has allowed to take into consideration some effects on regional growth – like changes in the sectoral composition – that were in traditional models hidden behind an aggregate GDP growth pattern (Cappellin, 1975 and 1976). The model has been estimated on a rather rich database in time series for the period 1951-1973, a large effort for that time. The Lombardy’s first model has over time developed in a multiregional growth model, with all italian regions involved (Cappellin, 1984), and in a more sectoral disaggregated version, taking into account also the service sector (Cappellin et al., 1987).

Probably also because regional econometric models run out of fashion, to my knowledge nothing new has been produced in this field in Italy until very recently, when a new econometric regional growth model was developed and estimated on all regions (NUTS 2) in 27 european countries by an italian research team in a European ESPON (European Spatial Observation Network) project (Capello, 2007b; Capello et al., 2008).

The specifications of the regional growth model, called MASST (Macroeconomic, Sectoral, Social, Territorial) model reflect the theoretical advances in regional growth developed since the 1970s. It is first of all a territorial model, where spatial linkages among regions (like proximity and spillover effects) and the territorial structure of regions (urbanised, agglomerated, rural) find a role in explaining local growth. At the same time, it is a relational and sectoral model, where the sectoral and relational elements find a place in explaining growth, and, more traditionally, a competitive model, in which the dynamics of the local economy are explained by supply elements like quality and quantity of resource endowment. It is a macroeconomic model, where aggregate macro-economic components have to find their role (sometimes overlooked in purely regional approaches). Macroeconomic variables in fact play an enormous role in boosting national (and therefore regional) growth: let us think only to currency de-valuations, movements in exchange rates, fiscal and monetary policies both at the national and community (i.e. European Union) levels. Their effects on regional growth follow mainly a demand-driven logical chain that has to be accommodated side-by-side with supply-driven processes if the model is to fully interpret regional growth patterns. The MASST model therefore encompasses all these factors and logics even though a full closure of the macroeconomic interrelationships of national accounts is not possible at this stage; most macro-economic variables concerning state budgets or balance of payments disequilibria

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remain exogenous. MASST is an interactive model, in which an interactive process of the local economy within the wider national and international economic system finds its right role. In fact, one of the most innovative aspect of MASST is its nature of being, in the words of Richardson (1969), a “distributive” and a “generative” model at the same time, i.e. a top-down and a bottom-up model; in fact the model allows for endogenous differentiated regional feedbacks of national policies and trends, and distributes them differently among regions, according to their capacity to capture national growth potentialities, following a distributive logic. On their turn, regional shocks, and regional feedbacks, propagate on regional GDP growth on the basis of structural elements explaining regional capacity to re-act to shocks. Regional shocks propagate to the national level through the sum of the regional GDP levels, giving the model a generative nature. A recent updated version of the model (the MASST 2 model) revisits especially the sectoral dimension, and models the regional differential as dependent on the sectoral composition of the region and its inter-sectoral productivity, which horizontally affects all sectors located in an area, as suggested by Camagni and Cappellin in 1985 (Capello, Fratesi, 2008).

3.2. Spatial Econometrics and Distributional Approaches to Regional Convergence

Over the last ten to fifteen years a large consensus has been achieved on the importance of spatial effects (spatial dependence and spatial heterogeneity) in regional economic growth. Spatial econometric techniques have become a “must” in regional empirical analyses, and this holds particularly in the field of regional growth models (Paelink, Klaassen, 1979; Anselin, 1988). Italy plays an important contribution in the field of spatial econometrics first of all at the institutional level, holding the presidency of the “Spatial Econometric Association” thanks to Giuseppe Arbia.

From the scientific point of view, the recent technical developments in spatial econometrics have given rise to two different research programs among scientists, both in Italy as well as in all other countries. The first is a scientifically-driven attitude which forces to re-run previous empirical analyses using the new tech-niques in order to corroborate the results achieved. The second attitude consists in the application of new techniques for a different theoretical purpose: to add interregional interdependence to the measurement of regional growth. For exam-ple, spatial econometric techniques applied in analysis of the role of innovation in regional growth can prove the existence of interdependence among local actors, and can therefore provide evidence of the presence of clusters or regional innova-tion systems and of their importance for regional growth. In Italy, many works have revised old measurement issues with the new techniques, and some have tested the existence of interdependence among local actors, increasing accuracy and reliabil-ity of empirical results. Especially in the field of innovation and regional growth, interesting analyses have been run (Paci, Usai, 2000; Paci, Pigliaru, 2000; Sterlac-chini, Venturini, 2009).

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In terms of original work, the issue of regional convergence measurement is a field in which spatial econometrics finds a innovative applications, and it is exactly in the field of regional convergence that the most original contributions came from italian scholars. It is worth mentioning the publication of an advanced textbook in spatial econometric by an international publisher authored by an italian, Giuseppe Arbia (2006); in the textbook, all practical examples of the application of the meth-odology are in the field of regional convergence.

A new method for an endogenous determinant of heterogeneity in regional convergence patterns has been proposed, once the spatial dependence in the data has been properly treated. The method, called spatially filtered mixture regres-sion approach and applied to regional convergence, can be found in the works of Paap and van Dijk (1998), Tsionas (2000) and Bloom et al., (2003). Those studies, however, do not deal with spatial related questions, as does the recent work of Battisti and Di Vaio (2008). Applied to a european dataset at NUTS 2, the results are interesting, since the method endogenously identifies multiple, a-spatial, growth regimes: many regions, whether inside poor or rich countries, fall into the non-convergence regime, where increasing returns and agglomeration factors might play a role. Convergence between countries and not within countries seems to be the main message.

Moreover, a semiparametric spatial Durbin model has been proposed by Basile (2008a), a combination of a semiparametric approach with the usual parametric spatial econometric technique. This specification allows to accommodate both spatial dependence and nonlinearities as suggested by neoclassical growth models with spatial technological interdependence. Modern semi-parametric techniques accommodate in fact nonlinearities for a subset of growth determinants, and inter-actions between explanatory variables, aspects that can be of extreme importance in the explanation of regional convergence. Using data on european regions in the period 1988-2000, Basile finds evidence of nonlinearities in the effect of initial per capita incomes and of schooling levels. Moreover, interdependence between the characteristics of each region and those of its neighbours clearly show up; for example, it emerges that even those regions with schooling levels lower than the EU average benefit from externalities generated by the accumulation of human capital in nearby regions (Arbia, Basile, 2005; Basile, 2008b).

Innovative approaches to the study of regional economic dynamics in a continu-ous time spatial econometric models have been suggested (Piras et al., 2007). In a continuous model, the specification of the model suggested by the authors and applied to five italian regions over the period 1980 – 2003 take into account secto-ral interdependences and interregional spatial spillover effects.

The debate in the field of regional convergence also suggests to move away from the easy and implicit assumption contained in parametric methodologies that each economy is characterized by a steady-state growth path along which the economy is moving (Baumol, 1986; Barro, 1991; Barro, Sala-y-Martin, 1991; Galor, 1996; Durlauf, Johnson, 1995, Lòpez-Bazo et al., 2004, amongst others). The idea of “convergence club” has been introduced by Quah (1997), accepting the existence

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of structural heterogeneities and therefore the existence of multiple regimes in cross-country growth behaviours. Sources of heterogeneities in growth patterns can either depend on country specific constraints on the adoption of technologies that affect the efficiency of regional economies (Durlauf et al., 2001), or by spillovers effects due to physical or human capital accumulation that produce a shift in the aggregate production function (Durlauf, Quah, 1999).

Within this debate, important contributions have been highlighted by italian scholars. In particular, within the distributional approach to convergence, a non-parametric methodology has been suggested which focuses directly on the cross-sectional distribution of per capita income, modeling the growth process as a time homogeneous Markov chain (Magrini, 1999 and 2004). Built on a work of Quah (1996), Magrini’s contribution presents similarities and differences with respect to the original contribution. In common with Quah, the methodology directly analyses the cross-sectional distribution of per capita income, studying its intra-distributional dynamics and the change in its external change, moving away from the (parametric) regression approach. The approach concentrates in fact directly on cross-sectional distributions of per capita income, using stochastic kernels to describe their law of motion. Differently from Quah, the study by Magrini makes use of a discrete income space rather than a continuous one because discretisation not only allows the study of the one-period dynamics and the resulting ergodic distribution, but also the analysis of the transitional dynamics as well as the calcu-lation of the speed at which the steady state is reached.

This non-parametric methodology is innovative in that it allows to reduce subjec-tivity in the choice of the income class size among a set of alternatives obtained by different discretising criteria designed to minimize some measure of the error of approximation.

4. Empirical Contributions

4.1. Measurement of Productivity Gains: Theil Decomposition and Regional Growth Patterns

Especially in the field of statistical methods for the measurement of productiv-ity gains, innovative approaches have been developed for the time in which they were first applied. In their 1985 study for the European Commission, Camagni and Cappellin propose for the first time a decomposition of the Theil index of dispari-ties in productivity, so as to capture different effects behind productivity dispari-ties. With a simple decomposition of labour productivity levels at current prices in purchasing power parity into the multiplicative form of three indicators - labour productivity at constant prices, the relative evolution of internal prices relative to foreigner prices, and the purchasing power parities index – the various effects explaining the evolution of productivity index can be disaggregated into: effects due to technological factors, those determined by the market power of the various

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economies, such as the evolution of prices expressed in common currency, and the effects due to the relative evolution of internal prices relative to foreigner prices, such as the evolution of the purchasing power parity index (Camagni, Cappellin, 1985).

Moreover, an additional innovative statistical method has been envisaged concern-ing productivity gains. Starting from the idea that productivity increases can take place within different structural processes, which affect the general performance of the regional economies in rather different ways, Camagni suggests a statistical methodology in order to highlight whether productivity gains are the outcome of growth of new and efficient firms, reconversion processes, restructuring of existing production through process innovation, dropping out of non efficient productions (Camagni, 1991a). In particular, he suggests a method to analyse three indicators at the same time on a chart: relative employment growth, relative productivity growth and relative GDP growth. In fact, when the first two indicators are plotted on two axes, a 45° negatively slopped line passing through the origin reflects a condition of GDP growth rate equal to the national average: a region may develop at the same rate of the national GDP either if both productivity and employment grow at the same rate as the national average, if productivity increases at a lower rate but employment at a higher than average rate, and vice versa. On the chart, six possible patterns of regional growth emerge that may be designated as follows (Camagni, 1991a):

1. virtuous cycle, when higher than average productivity growth generates good performance in both employment and output; 2. restructuring, when a higher than average productivity growth is reached through severe employment cuts, leading nevertheless to good output performance; 3. dropping-out, when productivity growth is reached by closing down inefficient production units, generating lower than average production growth; 4. de-industrialization, defined as a vicious cycle in which employment cuts are unable to restore competitiveness, a condition that perpetuates job losses and low output growth; 5. industrial conservatism, when poor productivity growth is accompanied (and sometimes explained) by a better than average employment growth, generally due to public assistance and industrial rescues; 6. sheltered development, when explicit or implicit assistance policies spur the ini-tial development of the areas, notwithstanding low productivity performance.This methodology allows therefore to distinguish between very different situ-

ations hidden behind productivity gains: new and efficient firms, reconversion processes restructuring of existing production through process innovation, drop-ping out of non efficient productions.

4.2. Verdoorn Law

An empirical area where italian scholars have played a substantive role is the empirical verification of Verdoorn’s Law (Verdoorn, 1949), which is still a matter

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of much controversy. The first empirical tests conducted by Kaldor (1975) were criticised for assuming an endogenous relationship between the dependent variable (productivity) and the independent variable (employment), the reason being that the latter is by definition at the denominator of the productivity index (Rowthorn, 1975). Kaldor rebutted these criticisms with empirical proof that the relationship between the output growth rate (in its turn correlated with the employment growth rate) and the productivity growth rate does not hold in some sectors, in particular agriculture and trade. Moreover, empirical analyses of the Verdoorn’s law were criticised for the endogeneity they encountered: is the output growth rate that deter-mines the productivity growth rate, as Verdoorn’s Law postulates, or vice-versa is the productivity growth rate that determines the output growth rate?

A way out of the dispute was suggested, by adding a constant in the equation linking productivity and regional growth, which explains the exogenous growth of productivity independently of output. An empirical test of Verdoorn’s Law for the italian regions run by Soro (1986 and 2003) has shown that the independent component of productivity not explained by the output growth rate accounts for the largest share of the overall growth of productivity.

5. Conclusions: Future Research Directions

If we look at the history of thought in regional growth models, an impressive theoretical development has taken place through a cross-fertilisation of ideas and approaches. A certain convergence has come about between the large groups of theories discussed. Local endogenous development theories merge together ideas put forward by the theories of development and of location. New growth theories (new economic geography) amalgamate growth and location theories.

If we look at what happened just very recently, new growth theories made a commendable effort to include space in strictly economic models. Also to be commended is the implicit merging in its theoretical structure of the various conceptions of space put forward over the years: the merging, that is, of the phys-ical-metric space represented by transport costs with the diversified space which assumes the hypothesis of the existence of certain territorial polarities where growth cumulates.

These theories achieved considerable success and acclaim in the academic community because they showed that territorial phenomena can be analysed using the traditional tools of economic theory (optimizing choices by individual firms and people), and that the various conceptions of space can – apparently – be synthe-sised. These models in fact conceived growth as an endogenous growth generated by the advantages of the spatial concentration of activities, and by the agglomera-tion economies typical of diversified space theories. They counterposed dynamic growth mechanisms with increasing returns and transportation costs, thus reprising the economic-locational processes analysed by location theory.

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These theories anchored their logic on the assumption that productive activi-ties concentrate around particular ‘poles’ of development, so that the level and growth rate of income is diversified even within the same region. However, these models stylized areas as points or abstract dichotomies in which neither physical-geographical features (e.g. morphology, physical size) nor territorial ones (e.g. the local-level system of economic and social relations, well explained in the previ-ous chapter of this issue) play a role. Thus inevitably abandoned is the concept of space as territory so favoured by regional economists. This stylized space does not comprise localized technological externalities, nor the set of tangible and intan-gible factors which, thanks to proximity and reduced transaction costs, act upon the productivity and innovative capacity of firms; nor the system of economic and social relations constituting the relational or social capital of a particular geograph-ical area. Yet these are all elements which differentiate among territorial entities on the basis of specifically localized features. As a consequence, these approaches are deprived of the most interesting, and in a certain sense intriguing, interpretation of space as an additional resource for development and as a free-standing production factor. Predominant instead is a straightforward, somewhat banal, view of space as simply the physical/geographical container of development.

The challenge in front of regional scientists is that a new approach is required combining economic laws and mechanisms which explain growth, on the one hand, with territorial features that spring from the intrinsic relationality present at local level on the other. Such an approach would represent the maximum of cross-fertil-ization among location theory, development theory, and growth macroeconomics; a synthesis which would bring out the territorial micro-foundations of macroeco-nomic growth models. An undertaking of this kind, though, would require analysis of variables besides the cost of transport, which annuls the territory’s role in the development process. Also necessary would be variables that give the territory prime place – even in purely economic models – among local growth mechanisms. This is where most efforts should be put in the years to come.

Italian scholars are well placed to take up this challenge: a relevant theoretical, though not stylized, approach was globally launched with the industrial district paradigm, emphasising local territorial conditions (Becattini, 1979; Camagni, 1991b; Maillat et al., 1993). This approach is increasingly blended with formalised models and starting to show innovative and relevant results, as it is shown in the paper, and as I have suggested in many occasions (Capello, 2007a; 2008).

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Soro B. (2003) Fattori che regolano lo sviluppo della produttività del lavoro. Fifty Years On. In: McCombie J., Pugno M., Soro B. (eds.), Productivity Growth and Economic Performance. Essays on Verdoorn’s Law. Basingstoke: Palgrave Macmillan. 37-63.

Sterlacchini A., Venturini F. (2009), Knowledge Capabilities and Regional Growth: an Econometric Analysis for European Developed Regions, Scienze Regionali – Italian Journal of Regional Science, 8, 1: 45-70.

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Part 2. Knowledge, Innovation and Regional Development

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Scienze Regionali Vol. 8 – n. 3, 2009, pp. 81-100 Thirty Years of Regional Science in ItalyItalian Journal of Regional Science Special Issue

Innovation, Technological Diffusion and Regional Development

Enrico Ciciotti*

(Paper first received, March 2009; in final form, June 2009)Abstract

The paper reviews the contributions made by Italian regionalists to the debate on the role of knowledge, technical change, and innovation in regional development in the last thirty years. The results show that Italian scholars have given seminal contribu-tions from the theoretical point of view, as well as providing strong empirical evidence in support of their theses. Many topics have been analysed and successfully developed by Italian regionalists (among others, functional deficit, innovative milieux, collective learning, and territorial competition). However, their most original contribution has been to draw a clear-cut distinction between space and territory, with material factors, more than physical proximity alone, playing a significant role in innovation at regional level.

Keywords: knowledge, innovation and territorial development

JEL Classification: R10, R11

Innovazione, diffusione tecnologica e sviluppo regionale(Articolo ricevuto, marzo 2009; in forma definitiva, giugno 2009)

SommarioIl lavoro presenta una rassegna dei contributi apportati dagli studiosi italiani sul

ruolo della conoscenza, del cambiamento tecnologico e dell’innovazione nella crescita regionale. I risultati mostrano che gli studiosi italiani hanno contribuito con idee semi-nali sia a livello teorico, sia a livello di verifica empirica a supporto delle idee teoriche seminali. Molto sono gli argomenti affrontati dai regionalisti italiani, tra cui il deficit funzionale, i milieux innovateurs, l’apprendimento collettivo, e la competitività terri-toriale. Tuttavia, il contributo maggiore è la netta distinzione tra spazio e territorio nei processi innovativi; il territorio è associato non solo alla prossimità fisica, ma a quei processi di creazione della conoscenza che derivano dalla struttura socio-economica di un’area.

Parole chiave: conoscenza, innovazione e sviluppo territoriale

Classificazione JEL: R10, R11

* Department of Economics and Social Sciences, Catholic University of Piacenza, Via Emilia Parmense 84, 29100 Piacenza, Italy, e-mail: [email protected].

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1. Introduction

The study of the relations between technological change and regional develop-ment is a quite recent development in applied economics. It was in fact at the end of the 1970s that the significant structural changes characterising industrialised countries at that time directed the attention of researchers and policy-makers to the possible relationships between innovation and regional development. The severe economic recession which hit even the most developed regions led to a questioning of the opportunity/efficacy of regional policies based on investing in physical infra-structures and on promoting the location of industrial plant by large enterprises. Furthermore, the new economic and technological paradigm raised doubts about the nature itself of core/periphery relationships.

Both the above aspects required taking a new approach to regional develop-ment and to regional policies, neither of which could be any longer based on the mobility of capital and the supply of cheap labour. The new approach focused on endogenous as well as exogenous forces for developing backward regions, and in general any kind of local system, by specifying the crucial role of industry, serv-ices, and public and private institutions in the generation, adoption and utilization of innovations. The key factors in the new strategy thus became knowledge and technological change.

In order to analyse in detail how this general idea has been developed over the last thirty years, both in terms of theories and empirical evidence, this paper divides into four separate but interrelated sections according to the main focus of the stud-ies analysed.

The starting point (section 2) is the role of technology and innovation in regional development. The studies concerned with this topic have focused on: a) the geog-raphy of innovation (by measuring regional innovative performances in terms of both input and output indicators); b) the location of innovative firms; c) the process of spatial diffusion of technologies; and d) the relations between innovative and economic performances at regional/local level.

A second branch of analysis (section 3) focuses on the clustering of innovative activities (e.g. on regional systems of innovation). To some extent this approach represents the other side of the coin to that described in section 2. Instead of exam-ining the role that innovation may play in the development of backward regions and local systems, it focuses on the role that territories may assume in the innovation process. The functioning of technological districts, innovative milieux, regional innovation systems and sectorial innovation systems are the main focus of analysis in such studies.

The transition to a ‘knowledge economy’ as an extension of the ‘information society’ requires that the rules and practices determining success in the industrial economy be rewritten for an interconnected, globalised economy where knowledge resources such as know-how, expertise and intellectual property are more critical than other economic resources such as land, natural resources, or even manpower. Thus, although already implicit in the concept of innovative milieu, the process of

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collective learning and the role of different actors and players (including public and private institutions) become much more crucial in view of a knowledge economy and innovation in an evolutionary approach (section 4).

Section 5 looks at territorial competition. The emergence in the past decade of territorial competitiveness based on the skills and specific properties of a place, following the rationale of enterprises’ new value chains, has required new approaches to regional development. In this scenario the crucial aspects for local development are the concept of territorial competition based on specificity; the role of innovation in this new perspective; and the role of knowledge networking and institutions in the context of the learning region.

Finally, following on from the considerations in the previous sections, section 6 briefly outlines the various problems and issues regarding a research agenda at both analytical and political levels.

2. Technology, Innovation and Regional Development

In the 1970s, a systematic attempt to link technology, innovation and regional development and policies was made by a group of international researchers on appointment by the Commission of the European Communities.1 The basic idea was that, in the future, problem regions would have to depend more on their own resources for their development than they had done in the past, given that the flows of enterprises and investments into them from elsewhere, which had been the principal factors in regional development as a consequence of the way in which regional policy had hitherto operated, could no longer be relied upon. The crisis of the Fordist mode of production, and saturation of demand for consumer goods (i.e. stalemate in technology, see Mensch, 1979), as well as the new international division of labour, were the principal reasons for developing a new approach to regional policies.

Two concepts were developed in order to address regional problems: first, regional innovation potential, i.e. “the network of those economic activities and functions of individual firms and their environment which determine the speed and scope of technical and organizational modernization and the ability of firms within the region to compensate for the loss of old markets by opening up new market potential”, and second, functional deficit, i.e. the lack of human capital, information and communication technologies, risk capital and flexible social and organizational structures (Ciciotti, Wettmann,1981)

1. Operating since 1975 at the International Institute of Management of the Berlin Science Centre, on behalf of the EEC, the ERPU – European Regional Policy Unit was formed of rese-archers from Great Britain, Ireland, France, Germany, Italy, Denmark and the Netherlands. It is worth mentioning that the contributions by these authors to the formulation of new approaches to regional policies have been based on both theoretical considerations and empirical evidence collected in the countries mentioned.

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In general, the role of technology in explaining regional disparities is directly related to the fact that differences in the growth rate of productivity are the most important components in the evolution of per capita income disparities (Camagni, 1982; Camagni, Cappellin, 1984). Yet there are other ways in which technological change may affect regional economic development: indirectly through its impact on competition between firms, because process and product innovations allow for better performances and, in turn, for increases in exports and in the growth of the regional economy; through its impact on the sectoral composition of a regional economy; and finally through its effect on the spatial organization of production, both at inter-firm level (via networking) and intra-firm level (via flexible specialisa-tion) (Cappellin, Nijkamp,1990).

Apart from the authors cited above, Italian scholars have played an important role in many areas of research closely connected with the impact of technological change and innovation on regional development (Ciciotti et al., 1990). They have focused in particular on the geography of innovation (measured in terms of both input and output), the location decisions of innovative firms, and the process of spatial diffusion of technologies.

2.1. The Geography of Innovation

An attempt to measure regional differentials in patent activities in Italy has been made by Boitani and Ciciotti (1990). Standardization by industrial employment and by sectors reveals a clear-cut ‘regional factor’ in innovative performance, with marked differences between highly developed and less developed (mainly south-ern) regions. Furthermore, the same industrial sectors have different technologi-cal fertilization capabilities in different regions. Finally the analysis confirms the opinion that both patenting and R&D activities are imperfect measures of innova-tion potential, and that they should be used jointly to gain better understanding of regional innovation processes.

Patents have also been used to analyse the determinants of innovation at provin-cial level (Antonelli, 1988). Empirical results show the important role of R&D, producer services, entrepreneurship, high wages and large enterprises (that is, of agglomeration economies) in fostering patent activities by firms

More recent studies at European level have used patent data to confirm the uneven spatial pattern of innovation (Paci, Usai, 2000). However, the concentra-tion of technological activity tended to decline over the 1980s; as expected, there was a positive association between the regional distribution of innovative activity and labour productivity.

A cross-sector analysis of the geography of innovation using patent data has highlighted some interesting aspects (Breschi, 1999 and 2000). On the one hand, the empirical evidence shows striking divergences across technological classes in the spatial pattern of innovation. On the other hand, also typically observed are quite remarkable similarities across countries in the spatial pattern of innovation within each technological class.

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Ciciotti (1986a) has shown regional differentials in innovation potential (meas-ured by R&D, headquarter functions, producer services) heavily weighted in favour of Northern Italy. The north/south gap in innovative capacity has been confirmed by comparing indicators of R&D, patents and innovative firms (Ciciotti, 1992). This analysis shows the different approaches to innovation adopted by the Italian regions, which, apart from Lombardy and Piedmont (the most innovative regions, with excellence at the same time in R&D, patents and innovative firms), focus only on one (or at the most two) innovative activities. These results are consistent with those reported by Epifani et al. (1987), who show the different patterns followed in the development of Italian production systems by using data on R&D, patents, producer services, and level of industrialization at municipal levels. This analysis, too, highlights the differing innovative performances of local production systems.

A very interesting use has been made of the input-output technique by Maggioni and Miglierina (1995), starting from the concentration of innovative activities in Lombardy and Piedmont (Ciciotti, 1992), and showing the diffusion of innova-tion in the rest of Italy according to three different modes: horizontally between Lombardy and Piedmont, top down from Lombardy to the rest of Italy, and hori-zontally between innovative sectors and mature sectors in the rest of Italy.

Ciciotti and Rizzi (2003) show the close relation between innovation and economic performances in terms of productivity and export, at the same time confirming the different development models of the Italian regions, which have experienced growth in gross domestic product not necessarily associated with innovations. These results are consistent with those of Baici and Mainini (2005), who find that the relations between innovative performance and development at regional level are still difficult to establish, given the different patterns of economic development followed by the different regions. They provide empirical evidence of the relative advantage in terms of rate of growth in the number of innovative firms recently achieved by North-Eastern regions with respect to the North-West, which, however, maintains its advantage as expressed in absolute numbers of innovative firms.

2.2. The Location of Innovative Firms

The incubator hypothesis, originally formulated by Leone and Struyk (1976) has been tested for the metropolitan areas of Milan (Ciciotti, 1984). The results confirm the positive role of the metropolitan core in the birth rate of high tech firms (“birth rate hypothesis”) and the role of the periphery in attracting firms as soon as they develop in terms of both size and product life-cycle (“mobility hypothesis”). Another interesting contribution to the analysis of the relation between high tech activities and metropolitan areas has been made by Camagni and Rabellotti (1988), who show the strong concentration of high tech firms, institutions and services in the Milan metropolitan area.

An interesting finding in regard to the location of high tech firms is reported by Maggioni (2001), who demonstrates the positive relation between cluster growth

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and small firm size in the early ‘heroic’ stages of development of industrial clus-ters. However, when the first signals of input competition and congestion begin to appear, these small and creative firms cease being the most suitable organizational form, and they are replaced by larger and more structured firms. The locational pattern of established high-tech clusters is therefore determined much more by economies of scale than by agglomeration economies.

On analysing the location of multinational firms in Europe, Piscitello (2002) found that a region’s capacity to attract high tech functions and activities depends on general-purpose knowledge spillovers, the presence of innovative firms, and the degree of industrial specialization of the region in the same technologies.

2.3. The Spatial Diffusion of Technologies

Territorial disparities in the adoption of process innovations (e.g. CAM, CAD, CNC, robots) have been analysed by several authors (Ciciotti, 1986b; Camagni 1984; Camagni, Pattarozzi, 1984), who provide empirical evidence of strong differences in the pace of adoption of such technologies in the Italian regions. To summarise, North-Western regions (namely Piedmont and Lombardy) have been the leaders, whereas the Third Italy has been a rapid follower in the programmable automation trajectory; furthermore, the gap between the north as a whole (the old and new industrial regions) and the south has widened over time.

Three preconditions are necessary for faster technological diffusion to come about (and inter-regional adoption of a new technology) (Camagni, 1985): avail-ability of information in the territorial context, depending greatly on its recep-tiveness and endowment with advanced human capital; relative profitability with respect to existing technologies; and low adjustment cost from the old to the new technologies. For a new technology to be adopted, it is not sufficient that it demon-strates economic superiority with respect to existing technologies; it is also neces-sary that the present value of differential earnings are expected be higher than the costs which have to be met to bring the internal structure of the firm into line. And this last element is also linked to the characteristics of the regional environment (Camagni, Cappellin, 1985).

As regards the characteristics of the diffusion process, Camagni (1985) has found that the diffusion of flexible automation technology can be represented by a two-stage model where an intra-sectoral adoption process takes place along a logistic curve à la Metcalfe, but where also an inter-sectoral process, again described by a logistic curve, is evident and affects different industries characterized by different profitabilities and different adjustment costs. The model is estimated empirically in the context of Italian regions. Also Capello (1988), on analysing the spatial diffu-sion of telephony services, has shown empirically that the shape and characteristics of the diffusion curve in different regions are explained by “economic proximity” (i.e. regions with the same level of economic development have the same diffusion curve).

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More in general, very interesting results have been obtained by analysing the transition of factory automation from second programmable devices (based on microelectronics) to those of the third generation (based on software and commu-nications). Arcangeli and Camagni (1990) come to the following conclusions: first, the more complex the technological systems, the more innovative industries are in creating networks of co-operation, thus engendering industry hierarchy and polari-sation effects for the core industries of the new trajectory; second, what appears at macro level to be a locational shift of fast-growing industries, both across and within world regions, is the effect of the capacity of some selected old industrial regions to re-industrialise, as well as being the effect of the emergence of new districts, growth poles, and innovative co-operation between the producer/producer and user/producer pairs.

A recent contribution to the empirical literature on the Italian North/South divide in ICT endowment (Bonaccorsi et al., 2006) corroborates the thesis that the spatial diffusion of ICT mirrors the existing geography of development.

Specifically, the level of absorptive capacity, measured by the knowledge avail-able at provincial level, is crucially important in explaining the use of ICT tech-nology. Furthermore, by using a spatial econometric approach, Bonaccorsi et al. (ibid.) prove that spatial proximity is important because adoption in one province is influenced by adoption in the adjoining province.

According to Capello (1994), there is a correlation between regional develop-ment and the adoption of ICT by local firms if some quantitative and qualitative pre-conditions are met, such as the presence of a critical mass of users and their strategic capacity to utilise ICT.

More in general, Camagni and Capello (2005) have investigated the possible positive role of ICTs as factors in regional competitiveness built around the Internet phenomenon and the consequent emergence of the “New Economy”. Their conclu-sion is that, even in the Internet era, the achievement of regional competitiveness via new ICTs is still a difficult process fraught with many obstacles and bottle-necks which may exacerbate territorial inequalities in the long run. Although the old adoption bottlenecks of the 1980s have been overcome, new and more subtle adoption barriers have emerged in the era of the Internet. These will be described below, and their territorial impact will be highlighted.

3. Local Development and the Clustering of Innovative Activities

Three main factors are responsible for growing interest in the clustering of innovative activities: the shift from regional development (i.e. from the develop-ment of backward regions) to local development, associated with a multiregional and endogenous vision of growth; the shift from exogenous to endogenous inno-vation/technical change; and the success of innovative clusters in areas such as Silicon Valley, Baden-Wurttemberg and the Third Italy (Cooke, Morgan, 1998). It should also be stressed that the consolidation of a systemic approach to theories

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of innovation (Edquist, 1997), for which enterprise clusters are one of the most recent explanations (OECD, 2001), further highlights the positive role played in the process of technology and skill transfer by geographic proximity and the conse-quent possibilities that both static and dynamic external economies may be gener-ated. ‘Enterprise cluster’ is the most recent version of concepts such as technologi-Enterprise cluster’ is the most recent version of concepts such as technologi- technologi-cal district (Antonelli, 1986), innovative milieu (Camagni, 1991a and 1991b; Senn, Bramanti, 1991; Ratti et al., 1997), regional innovation system (Cooke, 1998), and sectoral innovation system (Malerba, 2000).

Generally speaking, territorial innovation systems are considered capable of efficiently integrating skills in constant evolution at firm level, the supporting infra-structures, and the other intermediate innovative institutions which in general char-which in general char-acterise innovative clustering. The formation of these systems entails a networking activity in which the individual operators form tight and interdependent connec-tions. The interactions among actors vary according to the type of relationship, i.e. according to whether transfers of technology, financial transactions, or simply interpersonal contacts are involved.

The concept of ‘innovative milieu’ warrants specific consideration, given its implications for the role that the territory may play in the innovative process at local level, to some extent inverting the rationale of innovation-oriented regional development/policy. In fact, the focus is no longer on the role that innovation can perform in the development of backward regions, but rather on the role that the local system /innovative milieu can play in the innovation process, according to a bottom-up approach (Molle, Cappellin, 1988), with the focus on the socialized reduction of uncertainty and collective learning (Camagni, 1991a).

The main mechanisms for knowledge transmission and learning in innovative milieux are inter-relationships between suppliers and customers and the markets and users of capital equipment; formal and informal collaborative and other links among firms in particular sectors; inter-firm mobility of workers in local-ized markets for high skills; and the spinning-off of new firms from existing firms, universities, and public sector research laboratories. Labour mobility and new firm spin-offs transfer knowledge “once and for all” and/or serve to establish an ongoing link between firms and research institutions via personal relationships.

Camagni (1991b, p. 8) links the concept of both innovative milieu and innova-tion network with the evolutionary theory of technological change proposed by Nelson and Winter (1982) and Dosi, Freeman et al. (1988), and in particular with decision theory under conditions of static and dynamic uncertainty, which are the prevailing conditions in an innovative context. Proximity relationships of a mainly informal nature (milieu relationships) and trans-territorial-formalised relation-ships with selected partners (network relationships) become important features of a new dynamic theory of technical change because they reduce uncertainty through socialized information transcoding and enhance creativity via collective learning processes. The way is thus open for consideration of the territory as a natural and intrinsic dimension of economic evolution.

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According to Ratti (1991), there are three categories of functional or strategic space for a firm: the “production space”, defined in terms of organizational, tech-nological and labour-market elements; the “market space”, defined by geographical commercial relationships; and the “supporting space”. It is this last, defined by selective and qualified relationships with crucial information sources, privileged partners and strategic (public or private) institutions, which provides a firm with its true identity, its innovativeness and its dynamism.

Bramanti and Maggioni (1997) use a network analysis approach to analyse changes in the governance structure of ‘innovative milieux’ in order to under-stand their “law of motion” and the recent trend towards territorial delocalisation. It emerges from their analysis that the evolution of innovative milieux is closely linked with the nature and complexity of the governance structure operating in the local system, and with the coordinating behaviour of certain strategic actors.

4. Knowledge, Learning and Innovation in an Evolutionary Approach

Knowledge is the fundamental resource in the contemporary economy, and learning is the most important process (Lundwall, Johnson, 1994). In very broad terms, we can distinguish among processes, factors and players in an evolutionary approach to the knowledge economy. Starting from information, knowledge can be generated through a learning process (individual and collective). Knowledge (both as input and output) may in turn generate new products, processes, services and organizations through innovation and diffusion. These new factors, together with their diffusion (and more in general the diffusion of knowledge) are the basis on which the entire socio-economic system evolves. People, firms and institutions are the key actors in this general process (Ciciotti, 2007).

The knowledge economy therefore represents the new economic base for cities and regions, and it may enable them to achieve high growth rates in terms of income, employment, and quality of life. The implications of this approach are of considerable importance. In the traditional view of “innovation-oriented regional development/policies”, and in the “regional system of innovation” approach, the focus was more on factors (particularly codified knowledge, excellence of research and innovations, high-tech sectors and clusters) than on processes and players.2 According to the “knowledge-based regional development” school of thought, the approach should include all the elements included in the previous framework.

It is important to stress the role of learning and knowledge diffusion in the evolu-tion of the regional economy, as well as that of the different players active in the regions, and, more in general, of territorial governance. If we focus on process, i.e. on learning (the role of players will be investigated in more detail in the context of territorial competition), the distinction between knowledge spillovers and

2. Although the concept of collective learning is implicit in the innovative milieu approach (Capello, 1999), its role becomes more important in the knowledge economy, especially in contrast with that of knowledge spillovers.

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collective learning appears to be important. Although common to both concepts are the endogenous and cumulative features of knowledge and increasing returns to scale, the territorial cognitive approach is superior to the spatial-epidemiological one because it investigates the mechanism of knowledge production and diffusion, instead of considering space only as the place where the positive externalities are available (Camagni, Capello, 2002).

Italian scholars have played an important role in the development of cognitive approaches to territory in regard to three closely-related points in particular: knowl-edge spillovers, collective learning, and absorptive capacity. In a survey of the literature on knowledge spillovers, Breschi and Lissoni (2001) conduct a critical reassessment of the theoretical concept of localized knowledge spillovers, a notion on which the econometric literature based on the knowledge production function has relied heavily in recent years. Breschi and Lissoni’s main claim is that, notwith-standing the undeniable merits of this literature in drawing attention to regions as meaningful units of analysis for the study of knowledge flows, its insistence on knowledge spillovers as the main analytical category with which to explain the localized nature of innovative activities risks diverting research from other mecha-nisms governing endogenously-generated flows of knowledge, and it may have misleading policy implications. In particular, Breschi and Lissoni emphasise the need to investigate the roles of localized and competing networks of firms (i.e. not only cooperating ones), the labour market and inter-firm mobility of skilled work-ers, and contractual arrangements between local universities and firms.

But it is in studies by regionalists that the differences between knowledge spillo-vers and collective learning in generating the agglomeration of innovative activities appear most clearly. Indeed, industrial economists tend to underline the physical aspects of geographical proximity in explaining the innovative performance of firms, whereas, according to regional economists, of crucial importance are the mechanisms which enable firms to benefit from physical proximity (i.e. interac-tions among actors). It is cognitive more than physical proximity which generates knowledge-spillover effects (Capello, 2009). According to Capello (1999a, 1999b), collective learning can be defined as “a dynamic process of the cumulative crea-tion of knowledge freely transferred among economic agents by interactive mecha-nisms based on shared rules, norms, organizations and procedures”. Furthermore, “the transfer of creative and cumulative knowledge take place independently of (and perhaps even against) the will of the first investors, and the use made of collec-tive learning by local agents depends on their private interests and their structural features”. A crucial role in the transfer process is played by labour mobility within the local system, by interaction with suppliers and customers, and by new-firm creation via spin-offs.

Empirical studies have supported these assumptions by measuring collective learning and its relation with regional innovative performances (for a general survey see Camagni, Capello, 2002). In this regard, Capello (1999a), states that firms exhibit different behaviours according to their innovative activity: a collec-tive learning mechanism is present in very small firms highly dynamic in terms of

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radical innovation, whereas a profile of learning internal to the firm is more typical in the case of process innovation. Capello and Faggian (2005) furnish evidence of the importance of local labour-market mobility (specialized or diversified accord-ing to the case and territory) in explaining the innovative performance of firms, although customer/supplier interaction has an important role in more “traditional” clusters.

By means of a simulation exercise, Maggioni and Riggi (2002) show the exist-ence of the many and diversified channels and modes of collective learning, depend-ing, among other factors, on the phase of development of the local system.

According to Morrison (2006), even the absorptive capacity of firms (Cohen, Levintal, 1989) may play an important role in the innovative performance of firms. In other words, it is the strategy of firms that influences the will and capacity to exploit collective learning processes. These conclusions are consistent with find-ings on the overall process of innovation at local level. In a local system (of innova-tion), a major but different and complementary role is performed by factors (e.g. the locations of R&D activities, innovative firms, institutions and universities), processes (e.g. collective learning through labour-market mobility, inter-firm rela-tions and spin-offs) and strategies (e.g. the will of agents to use the opportunities offered by the location).

5. Innovation, Territorial Competition and the Globalization Process

Many structural changes characterized the most developed countries in the 1980s and 1990s. The most important of them were the partial obsolescence of Ford-type mass production models, the establishment of network models in company and territory organization, and the new role that external economies played in the strat-egies of different-sized enterprises according to their varying degrees of “globaliza-tion”. On a regional development level, these changes brought about the emergence of a territorial competitiveness based on the skills and specific properties of a place, following the logic of new enterprise value chains. Territorial differences, whether in terms of structure or strategies (regulation and mobilization of institutions, and a sense of belonging), therefore became the strengths of a region able to add its terri-torial and urban systems to the cooperation and synergy network (Ciciotti, 2005).

Therefore, in order to improve the competitiveness of its production, a region or a local system can start by acting on endogenous factors that determine local enterprise productivity, whether they are internal or external to the enterprises themselves. That is to say, it seems clear that territorial competition in advanced industrial systems can only operate in terms of productivity, not low wages. More generally, it should be noted that a local system’s growth and development is propelled by three forces: the growth of existing local firms, the birth of new firms, the location of external enterprises/organizations. The first two are clearly endogenous growth phenomena, while the third is obviously of exogenous origin. As suggested by Cheshire, Malecki (2004), policies can be addressed to attracting

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mobile investments as well as to improving the environment for existing local busi-nesses and fostering new firm formation. The evidence put forward by Karlsson and Stough (2001), and the analysis of differential European urban growth rates reported by Cheshire and Magrini (2002), are certainly consistent with the idea that a greater capacity to pursue territorial competition is positively associated with growth performance.

In a long-run view, however, as Thompson (1965) puts it, “ the very essence of growth is, in fact, the transition – sometimes orderly, sometimes chaotic – of the local economy from one export base to another as the area matures in what it can do and as rising per capita income and technological progress change what the national (and today global) economy wants done”. We know today that the most visible shift is from manufacturing or heavy industry towards services, particularly producer services.

In other words, what is ultimately important is the capacity to adapt/innovate the local economic base according to the external changes imposed by globaliza-tion. From this perspective, the aspects crucial for local development are territorial competition based on specificity; the role of innovation in this new perspective; and the role of knowledge networking and institutions in the context of the learning region.

5.1. Territorial Competition Based on Specificity

Joining the debate originally opened by Krugman (1998) in a deliberately provocative manner, Camagni (2002) rightly pointed out that it is correct to speak of competition between regions on the basis of absolute, not comparative, advan-tage, and therefore to propose intervention tools suitable for maintaining or improv-ing their competitive positioning. Indeed, while it is feasible on a national level for a country to sell products on the world market, thanks to its possible relative advantage compared with other countries, and essentially because of higher flex-ibility mechanisms regarding wages and currency devaluation, these mechanisms are excluded on an interregional trade level. Therefore, on adopting a rationale of territorial competition, non material factors (including collective learning) rather than traditional material factors may represent the absolute competitive advantage for the growth of regions in the knowledge economy era.

5.2. The Role of Innovation in Territorial Competition

Adopting the idea that territories may compete with each other – according to a market rationale similar to that of the entrepreneur – may at first be risky, prin-cipally because of an increase in the imbalance between strong and weak areas, or at least the creation of a zero-sum game without any advantage for the national system. In order to avoid this problem, it is necessary to explain the concept of competition on a territorial scale. In a short-term, static view, competition between regions can in fact become a zero-sum game between different areas, even nation-wide, if it is based only on the transfer of market potential from one area to another,

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whether this occurs by means of the actual movement of equipment, or through the acquisition of market share by the enterprise in one region rather than another. By contrast, competition seen in a dynamic sense and from a long-term perspective may be a positive-sum game if, thanks to the role of innovation, it increases the absolute potential of the regional market (Ciciotti, 1993).

A local system’s capacity to compete is therefore measured in terms of both market share and resources: investments and enterprises that it manages to attract from other areas, and of innovation in the products, processes and markets that it is able to generate in its own productive structure. To return to the three means of regional growth mentioned above (new entrepreneurship, development of existing enterprises, and investment attraction), it is obvious that the first two are closely related to a dynamic vision of competitiveness if associated with innovative proc-esses, whereas the third is more closely related to direct competition, and therefore to a zero-sum game.

On this view, Cheshire and Malecki (2004) suggest that the most purely capac-ity-enhancing policies may be those regarding education and training, because people whose skills are enhanced are able to take them elsewhere. By contrast, the representatives of a particular area may consider more diversionary policies to offer better returns only because the impact on other territories has been excluded from their calculation.

5.3. The Roles of Knowledge Networking and Institutions in the Context of the Learning Region

The network approach has been proposed by Cappellin (2001; Cappellin, Wink, 2009) to analyze the systemic nature of continual learning as the basis for innova-tion in local production systems. According to this approach, a “learning region” is a production system in constant evolution thanks to processes of learning, adaptation and innovation, and it may represent the final outcome of the evolu-tion of industrial districts. In this regard, knowledge management, i.e. the capacity to convert individual knowledge into organized and structured knowledge for the entire local system, is crucial, as is the role of intermediate institutions (on the insti-tutional thickness of a local system, see Rullani, 1998). We thus move from firms and collective learning to intermediate institutions (e.g. universities), and more in general to the problem of governance of the evolution process (including policy governance and policy learning).

6. Conclusions and Perspectives

The various problems and issues regarding a research agenda at both analytical and political levels emerge clearly from the foregoing discussion.

The first problem concerns the coexistence of local and global networking in the local production system. This dimension interacts at various levels – knowl-edge, technology, firms, individuals, institutions – and should be taken into account

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when analyzing territorial systems. For instance, how can we define collective learning when the local system is losing part of its “territoriality”? Does it make sense to speak of “virtual territory”, and what are the implications for regional development?

A second point for reflection concerns the new role that some economic, social and institutional subjects are assuming, especially in the context of the new view of scientific knowledge production. These changes primarily concern certain levels of government – regions and cities in particular – but also the whole of the public administration; they will influence enterprises and no-profit organizations and universities.

A third point for reflection concerns the recent trend towards strategic research and the affirmation of a new regime of Strategic Science (Rip, 1997). According to this approach, the aim of strategic research is to combine relevance (for specific contexts, above all local) with excellence (the advancement of science as such), thereby at the same time erecting a bridge between local/regional and global.3 Since the 1980s there has been a renewed interest in science and technology both as the means to solve specific problems, like those of an environmental nature and, more generally, as input to economic development. No less important in this context is the affirmation of a new technical-economic paradigm which has led, amongst other things, to the “scientification” of production by integrating science, technology and engineering into a single resource. New ways have thus emerged to produce science and to incorporate it into society, thereby bringing about the advent of a new regime of Strategic Science. A part of this new regime is a modified version of the division of labor between research and its applications (excellence vs. relevancy). Scientists have internalized the thrust towards relevancy, while at the same time maintaining the open character of their research and the related freedom of movement towards more promising lines of inquiry. Some of the more interest-ing and important innovations have originated from new transverse combinations and from cases of cross-fertilization based on the intellectual and social mobility of the key players.

This scenario highlights, amongst other things, the duty of universities to provide high-quality education and research specifically for enterprises and the public administration, which constitute the other two corners of an ideal triangle for the transfer of technological skills to society (Ciciotti, 2005).

The fourth issue is related to the set of problems deriving from territorial compe-tition, a new economic base, and governance of local policy (including strategic planning). Two principal questions arise:

3. According to Rip (2002), the contrast between fundamental research (scientifically excel-lent) and relevant research is not an inevitable contradiction; it has more to do with the division of institutional labor than with the nature itself of scientific research. The possibility to have scientific research that is excellent and relevant is demonstrated by numerous present and past examples. However, this combination is not present in the same way in all disciplines and in all scientific fields, but it can be found often enough to justify the request for a new category like strategic research which includes both.

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Regions, cities and territories: who are the new institutional players and what is a. the proper level of analysis? The discussion becomes even more complicated when we remember that for

some policies (especially innovation policies), territorial distinctions (for example, districts, clusters, innovative milieux as already mentioned above) often do not coincide with any explicit level of government. Another way of approaching this problem is to consider whether the region (city, district, local system) is able to represent the interests of the subjects involved in the various policies, to act as a regulator of conflicts and, therefore, to be the ‘forum” needed for the policies that concern them. In this case, too, the reply is not univocal and is postponed to consideration of the next problem.

The gap in the capacity for governance at regional level: is it a new deficit in b. development potential of regions?When speaking of governance, a distinction should be drawn between, on the

one hand, unofficial or informal governance, which has always operated in inno-vative systems, existing clusters and districts and, more generally, in all virtuous local systems, and, on the other, the “planned or strategic” governance inherent in the voluntary approaches to competition and deriving from the recent evolution of the culture of contract4 in almost all local policies. This last aspect is crucial if the final aim of local policy is to be long-term economic growth, i.e. innovation in the economic base (no longer only the manufacturing sector).There is, in fact, the risk that a further gap may be generated in terms of governance capacity, to the disadvantage of the very regions that most need it for innovative capacity, and for the other elements of endogenous development, just as used to happen in the past with localization factors.

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Scienze Regionali Vol. 8 – n. 3, 2009, pp. 101-126 Thirty Years of Regional Science in ItalyItalian Journal of Regional Science Special Issue

Knowledge Economy and Service Activities

Riccardo Cappellin*

(Paper first received, May 2009; in final form, July 2009)Abstract

This paper identifies some paths in the evolution of the international and mainly European literature on service activities, and it seeks to relate them to the emerging interest in the cognitive dimension of innovation processes. In particular, it indicates the contributions of Italian researchers who have actively participated in this interna-tional debate and in some cases anticipated new perspectives which have then been adopted by other researchers. A characteristic of these contributions is the link between the analysis of services sectors and the spatial characteristics of Italy, such as the diffusion of industrial districts made up of SME specialized in medium technology sec-tors and the evolution of the Italian urban system consisting of numerous small and medium-sized cities.

Keywords: services, KIBS, innovation, knowledge economy, urbanization economies

JEL Classification: R3, L8, O3

Economia della conoscenza e servizi(Articolo ricevuto, maggio 2009; in forma definitiva, luglio 2009)

SommarioIl contributo individua alcune linee dell’evoluzione nella letteratura internazionale

e soprattutto europea sui servizi e cerca di collegare le stesse con l’interesse emergente sulla dimensione cognitiva dei processi di innovazione. In particolare, esso illustra il contributo dei ricercatori italiani che hanno partecipato attivamente in questo dibattito internazionale e che in diversi casi hanno anticipato prospettive nuove che sono state successivamente adottate da altri ricercatori. Una caratteristica di tali contributi è il collegamento tra l’analisi dei settori dei servizi e le caratteristiche territoriali dell’Italia, come la diffusione dei distretti industriali composti da PMI specializzate in tecnologie intermedie e l’evoluzione del sistema urbano italiano che consiste di numerose città di piccole e medie dimensioni.

Parole chiave: servizi KIBS, innovazione, società della conoscenza, economie di urbanizzazione

Classificazione JEL: R3, L8, O3

* Faculty of Economics, University of Rome ‘Tor Vergata’, Via Columbia 2, 00133 Rome, Italy, e-mail: [email protected].

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1. Introduction

This paper identifies some paths in the evolution of the international and mainly European literature on service activities, and it seeks to relate them to the emerg-ing interest in the cognitive dimension of innovation processes. In particular, it indicates the contributions of Italian researchers who have actively participated in this international debate and in some cases anticipated new perspectives which have then been adopted by other researchers. A characteristic of these contributions is the link between the analysis of services sectors and the spatial characteristics of Italy, such as the diffusion of industrial districts made up of SME specialized in medium technology sectors and the evolution of the Italian urban system consisting of numerous small and medium-sized cities.

2. The Definition and Measurement of the Tertiary Sector

Service activities represent the largest part of employment and internal product in a modern economy. The development of service activities seems to correspond to a new phase in economic development, where the shares in employment of agricultural and industrial activities are decreasing with respect to those of terti-ary sectors. Services characterize a “post-industrial society” (Bell, 1974, where, besides the services most closely linked to manufacturing, such as transport, there are the activities in financial and trade intermediation and other modern service activities in the fields of education, health, research, leisure and management.

A traditional interpretation links the growth of services to the greater income elasticity of the demand for services with respect to manufactured and agricultural products, according to Engel’s law. By contrast, changes in industrial technolo-gies and organization highlight the importance of intermediate demand for indus-trial productions and the increasing importance of service activities in the various phases of industrial supply chains. In fact, the externalization of tertiary activities by industrial firms indicates that many new service firms are autonomously devel-oping activities which were previously attributed to internal functions of indus-trial firms. The “tertiary sector for the industrial system” (Momigliano, Siniscalco, 1980) represents a large share of the overall tertiary sector and records a higher growth rate than those of the tertiary activities for final demand and trade activities. Thus, the employment increase in services is to a large extent related to increased integration between services and industrial productions. The growth of the tertiary sector for the production system has become a specific pattern in the production system’s evolution, and it is a necessary condition for an increase in its efficiency.

However, a different approach to measurement of the increasing importance of services is based, not on the outputs of the various sectors, but on the inputs of those same sectors. In fact, the increasing share of service sectors in the national or regional economy (“explicit” tertiary activities) is linked to the increasingly impor-tant role of service functions within industrial firms (“implicit” tertiary activities). Cappellin has used an input-output approach to clarify three different measures of

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the share of services in the total economy (Cappellin, 1980b; Cappellin, Grillen-zoni 1983; Cappellin 1986b):

services as components of final demand, a. services as production sectors, b. services as production factors. c. A definition of services based on service occupations enables the analysis to

focus on the value of the work performed by service workers within both the service and the industrial sectors, and to exclude the value of the material inputs and manual occupations used within the service sectors. This definition has the advantage of focusing attention on the labour market. It overcomes the distinction between final and intermediate demand for services, or that between “consumer services” and “producer services”. It avoids attributing the growth of services to the outsourcing or externalization of those activities already existing within industrial firms. Moreover, this different definition seems to be particularly suited to studying the spatial distribution of service activities because labour markets have a mainly local character, and it links the process of tertiarisation to the evolution toward the knowledge economy and the increasing role of “knowledge workers” and of educa-tion and R&D policies.

In a regional and national framework, the development of services affects the development of industrial activities, and it is influenced in its turn by the develop-ment of the latter. The industrial base of a region or of an urban area cannot be competitive without modern knowledge-based services. On the other hand, a strong industrial base is crucial for the development of modern service activities.

Within the larger tertiary sector, knowledge-intensive business services (KIBS) may be defined as “those services that involve economic activities which are intended to result in the creation, accumulation or dissemination of knowledge” (Miles et al., 1995, p. 18). KIBS are characterised by their heavy reliance on professional knowledge, both codified-explicit and tacit-implicit. They can use their knowledge to produce intermediary services for their clients’ production proc-esses, and they are typically supplied to businesses through strong supplier/user interactions (Miles et al., 1995).

Traditionally, service activities have been distinguished from industrial activities by their immaterial or intangible character, which is related to the impossibility of accumulating stocks of output, the contextual character of production and use, the active participation of the client in the production process, and the importance of human resources (Paiola, 2006). While the immaterial characteristic does not apply to many traditional services which have become industrialized, it certainly applies to the case of KIBS. Thus KIBS are characterized by intangibility and interactivity (Miozzo, Soete, 2001).

The face-to-face contacts necessary for the exchange of tacit knowledge makes proximity and spatial agglomeration crucial for the delivery and production of KIBS, even in the presence of globalized knowledge flows. KIBS are confronted with the specific problems of their clients. Hence they very often require direct contacts

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with them in order to conceive solutions by recombining existing knowledge and complementing it with new inputs if necessary. A large share of these interactions, especially in the initial phase of a consulting activity, is characterized by a strong tacit content requiring personal contacts. Proximity (geographical, social, cultural, etc.) is hence helpful in managing these phases (Muller, Zenker, 2001).

The case of KIBS indicates the limitations of the traditional approaches to terti-ary activities, which were defined according to their residual nature with respect to primary (agricultural) and secondary (industrial) productions; were mainly linked to the growth of consumer demand; and were characterized by lower productiv-ity growth with respect to industrial products. By contrast, KIBS may be defined on the basis of their higher knowledge content. They are oriented to firms, not to consumers, and especially play a key role in the process of innovation in the other sectors while themselves being characterized by an important, though peculiar, process of innovation.

In particular, the following types of knowledge-based services can be identified:

“knowledge-intensive business services” (KIBS) may be defined as services -which involve economic activities intended to result in the creation and accu-mulation or dissemination of knowledge (Miles et al. 1995). They are addressed to firms, but they also include service activities, such as vocational training and mandatory social insurance, delivered to people when they are considered in their function as employees;“knowledge-intensive people services” (KIPS). These are consumer services – -such as health services or various services in cultural and media industries – which require workers with high knowledge and professional competencies or which make intensive use of modern ICT technologies. In fact, this distinction is often blurred, because service firms must often respond

to demand by both other firms and individual persons, as in the case of banks, insur-ance companies, legal services, and telecommunications. Thus both these service categories which characterize a modern knowledge economy may be included in the broader definition of “knowledge-intensive services” (KIS).

This clearly does not exclude that knowledge is increasingly important also in the case of traditional services, both those addressed to the firms, such as logistics and transport, and those addressed to people, such as entertainment industries and large retail distribution. In fact, technological change has been rather important in these activities, and this makes specialized competences based on an higher level of knowledge necessary.

The development of services is also linked to the process of globalization. Increasing international competition makes it impossible for developed economies to be competitive on the basis of low production costs alone, and it requires higher quality and the continuous innovation of industrial productions. In particular, it requires a continuous decrease in production costs, the more rapid adaptation of the product’s characteristics to the more complex needs of users, and the continuous

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substitution of traditional products with new products able to satisfy the new needs of consumers. These changes require the closer integration of services both in the production of products and their delivery to their external final or intermediate users.

The industrial firms of the most developed countries outsource a growing part of manufacturing activities to other firms in countries with lower labour costs. They adopt capital-intensive productive processes with which production cycles can be automated and manual labour substituted. The industrial firms specialize instead in immaterial or tertiary activities such as marketing, design, finance, organization of production, management of the supply chain, transport, and logistics.

According to Rullani (2006), industry may become similar to services because it has discovered the importance of linkage with the users of its products, and it develops a service relationship with them, or with qualified segments of them, as in the case of products which are not standardized but may characterize a specific lifestyle or membership of a specific post-modern community.

Turning to the supply side of the regional economy, the growing share of tertiary activities is also linked with the increasing role of knowledge, higher education levels, the higher qualification of the labour force, and its increasing preference for non-manual professions. Thus the most developed economies are more competitive in those sectors where highly qualified labour is required, since the latter is relatively abundant in these economies. By contrast, they de-specialize from those manufac-turing sectors where unskilled labour is required, since this latter is relatively more scarce in the most developed countries than in the less developed ones.

In conclusion, the increasing importance of KIBS in the economy is closely related to changes in demand by final consumers, which is increasingly oriented towards private and public services, to the development of tertiary sectors produc-ing for an intermediate demand, and finally to the development of service occupa-tions or the emergence of “knowledge workers”, both within service firms and within the user firms of the manufacturing sectors.

3. The Demand of Business Services in the Innovation Processes of SMEs

SMEs face particular problems in adopting a competitive strategy based on inno-vation as increasingly needed in developed economies. These constraints concern the lack of credit and risk capital, qualified human resources, technical information, internal R&D, organization of product distribution and in general of qualified tech-nological and managerial capabilities (Bougrain, Haudeville, 2002). This exter-nal sourcing of qualified services is systematic in the case of SMEs (IReR, 1979; Boscacci et al., 1986; Boscacci, Cappellin, 1990) and specialised business services may help SMEs by providing the capabilities lacking in these fields. In this case, business services perform a merely complementary role in the adoption of innova-tion. On the other hand, other business services may have a more proactive role,

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and they may stimulate firms to adopt innovations by helping them in designing the changes to be introduced, as in the case of external R&D or engineering services, or management consulting services.

All activities which do not belong to the set of core competencies are external-ised from the firm and assigned to specialized firms (Antonietti, Cainelli, 2007). Moreover, the outsourcing of high skill-intensive, high-quality goods and serv-ices has been encouraged by technological progress and reductions in transport and communication costs. The importance of spatial agglomeration and technol-ogy as the determinants of the decision to outsource KIBS at firm level has been shown by Antonietti and Cainelli (2007). These authors use microeconomic data on a repeated cross-section of Italian manufacturing firms for the period 1998-2003 and demonstrate that (i) the propensity to outsource is not affected by labour cost-saving reasons but depends directly on the firm’s size and investment in ICT equip-ment, and is negatively related to the firm’s capital intensity; (ii) the volume of KIBS outsourcing is positively related to investment in R&D, belonging to a rela-tively dense local production system, and the interaction between R&D and spatial agglomeration, which is particularly evident in mechanical industrial districts.

KIBS perform a key function in the phases of analysis and problem-solving for users. This capability is sometimes termed “evaluation” or organizational knowledge. In fact, the particular professional competences of KIBS enable them to identify problems that are often of a very complex nature and that the users themselves are unable to identify and solve. Secondly, KIBS may also provide users with specific solutions that overcome their cognitive deficiencies. This capa-bility is called “synthetic” knowledge and it allows the combination of different pieces of technical or engineering knowledge in the solution of a specific problem (Asheim et al., 2007). Therefore, from an innovation perspective, KIBS perform three types of functions: 1) problem identification and analysis; 2) diagnosis defini-tion and definition of the problem; 3) participation in the problem-solving process. KIBS can thus be termed “co-innovators” with the user firms because they not only provide technical support to users but also cooperate with the latter in innovation.

Related to the interactive characteristics of innovation processes is the fact that KIBS are not only based on knowledge and contribute to its generation in user firms but are also key actors in the management of knowledge flows between the various other local actors (Andersson, Hellerstedt, 2008). They perform the func-tion of “intermediaries” in innovation processes as the “best practices” adopted by firms within a sector, and also in different sectors, are made indirectly accessible to other firms characterised by more traditional technologies and organizational routines. KIBS thus facilitate the use of common organizational models and the sharing of technological knowledge among different firms, and especially among the SMEs of a regional innovation system (Muller, Zenker, 2001). KIBS are vital factors of connectivity and receptivity (Antonelli, 1999), and they increase the exchanges of tacit knowledge and localized competences among agents. KIBS use external codified knowledge acquired from university centres, from publications, or from the professional networks to which KIBS firms typically belong (Antonelli

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1998). From this perspective, they perform the function of an “immaterial infra-structure” or an “intermediate institution” which facilitates production cooperation in the network of firms, knowledge exchanges, and the internal coherence of a regional innovation system. Services therefore contribute to development of the “relational capital” which characterizes a local production system and stimulates the process of collective learning, together with other well-known linkages, such as labour – force mobility, client/supplier relationships, and the spinning-off of new firms (Capello, Faggian, 2005).

That intermediary function is particularly evident in the case of ICT services, because the flexibility and adaptability of communications have made these serv-ices crucial for production and for addressing the complexity and turbulence of the external environment (Capitani, Di Maria, 2000).

In conclusion, KIBS may a) provide specialized and general support to user firms, b) provide rare competencies to users, c) stimulate innovation, d) train the labour force and improve the capabilities of the human resources within users (Howells, 2006b; Miozzo, Grimshaw, 2005), e) promote indirect links among different user firms by working as intermediaries and bridging institutions and finally f) also learn by interacting with users and providing their services to them (Strambach, 2001; Müller, Zenker, 2001).

Hence KIBS firms also have a wider environmental impact than an effect on their direct users. KIBS interact with other KIBS firms and contribute to the social, economic and cultural vitality and international openness of the economy and the local community in which they are located (Bailly, Maillat, 1989), and they ensure the development of networks of small and medium-sized cities outside the large metropolis. In particular, KIBS contribute to the development of new and more sophisticated needs and the overall culture and knowledge in the areas where they are located, and they improve the supply of qualified human resources. They also contribute to the sense of belonging to a given geographical area because they act as intermediaries and establish network relations between firms and local stakehold-ers (Roma, 2007). From this perspective, KIBS constitute a key factor in explaining why cities drive the transformation of the national economy towards the model of the knowledge economy (Cappellin, 2007).

In conclusion, it emerges that KIBS not only represent a necessary complemen-tary factor which facilitates the adoption of innovation by user firms; they also have an active role because they stimulate the innovation of these firms by increasing their internal knowledge bases. In particular, they favour the adoption of organi-zational or systemic innovation by increasing cohesion in the local economy and promoting the indirect sharing of knowledge among the various sectors of a local economy.

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4. The Process of Knowledge Creation and Innovation within KIBS

Whilst it is widely recognized that KIBS contribute to the innovation of user firms, it is more difficult to distinguish the characteristics of innovation within KIBS. Service firms innovate (Metcalfe, Miles 2000, Gallouj 2002, Carlsson et al., 2002; Hipp, Grupp, 2005; Tether, 2003; Howells, 2006a), but they do not do so through activities which can be classified according to the traditional analytical instruments used in the study of manufacturing industry. In fact, as in the case of SMEs in medium technology sectors (Cappellin, Wink, 2009), in KIBS, too, it is rarely possible to identify R&D formalized activities and precisely measure input and output and then productivity (Cappellin et al., 1987), which is the traditional indicator of technological change. Several studies have shown that R&D activities play only a marginal role in the service sector, and patents are rarely taken out by service firms to protect their innovative output against imitation. In most service sectors, innovation activities are incremental in nature, require substantial human capital investment, and rely upon the acquisition and internal development of ICT.

In particular, Cainelli, Evangelista and Savona (2006) examine the links between innovation and economic performance in services, using longitudinal firm-level data based on CIS II (1993-95) and a set of economic performance indicators drawn from the Italian System of Enterprise Accounts (1993-98). The Community Innovation Survey takes into account, besides R&D, other fundamental sources of innovation for service firms, such as activities related to the design of new services, software development, the acquisition of know-how, investment in new machinery (ICT hardware), and training.

KIBS are based on types of knowledge (Asheim, Coenen, 2005; Asheim et al., 2007) which differ according to the field of activity: mainly synthetic knowledge in the case of engineering services; symbolic knowledge in the case of advertis-ing services; organizational and evaluation knowledge in the case of manage-ment consulting services; while research companies are clearly based on analytic knowledge.

Knowledge within KIBS is similar to “combinative knowledge” because it covers a relatively broad range of fields and is highly fungible (Antonelli, 1998). It is suitable for application to diverse problems and types of user firms, and for combination with their internal knowledge. By contrast, the knowledge and compe-tences of customer firms, and especially of SMEs, can be considered as “specialized knowledge” in a localized field. Moreover, decomposition into different modules yields KIBS firms the benefits of a greater division of labour or specialization, so that they can tackle complex problems efficiently and thus enjoy the advantages of economies of scale and scope (Miozzo, Miles, 2003).

Two approaches can be identified (Howells, 2006b; Sebastiani, 2006) in the study of innovation in services. According to a first and traditional approach, modern IT technologies constitute the central factor of innovation within services, and they may foster the development of new services or the increased productivity of serv-ices. According to a different approach (Bryson, Monnoyer 2004, Tether 2003,

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Rullani et al. 2005), services are characterized by the two dimensions of intangi-bility and interactivity. In fact, the characteristic of intangibility and the informal character of the innovation process determine the difficulties in measuring the input and output of innovation.

According to a service-oriented perspective, which applies especially to KIBS, innovation in services is client-oriented. Services are highly differentiated and require client-intensive arrangements in innovation. Service provision implies a close relationship with clients and co-production with the latter. In fact, the char-acteristic of interactivity indicates that innovation is the outcome of co-production between the producer and the user, determining the difficulty of attributing the innovation’s origin.

Gallouj (2002, pp. 40) goes further by noting that if the protagonists believe that the product they are paying for, and from which they are benefiting, is the immedi-ate act of service delivery, then process and product are virtually one and the same thing. In fact, in the case of services, product and process innovations are closely intertwined (Gallouj, Weinstein, 1997; Miles, 2005).

Since both the use of an immaterial content made up of different types of knowl-edge and the use of personalized relationships with the user are characteristics of KIBS, innovation in services consists not only in the use of new types of knowledge base but also in the development of new types of linkage between the producer and the users, as shown by analysis of more than fifty service-firm case studies in Italy (Rullani, 2006). In fact, new services characterized by new types of knowledge and linkages are appreciated by the users, and they determine the willingness to pay prices higher than those of the competing and traditional products and services.

It may be stated in general that product innovation within KIBS is more impor-tant than process innovation (Muller, Doloreux, 2009), and that product innova-tion, owing to its customization and the interactive nature of the process of service production and delivery, does not depend on its intrinsic characteristics alone but is also closely related to the specific user of the service considered. Thus innovation in services is characterised by:

continuous change and improvement of the quality of a given service delivered -to individual customers,change in the type of service delivered to the same customer, and change in the -customers served.KIBS recombine the knowledge previously acquired, reprocessing and adapting

it. This leads to the creation of new innovative services which represent an innova-tion for the KIBS themselves. The interactive relationships between KIBS and their user firms give rise not only to innovations for the latter but also to the development of experiences, competences, and therefore innovations within the service firms themselves. Thus KIBS themselves can be considered as “innovators” and do not contribute only to the innovative capabilities of their users.

In synthesis, the process of knowledge creation within KIBS is interactive and has an incremental and cumulative nature. It requires the combination of diverse

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internal and external types of knowledge and close interaction with the user firms, and with other service firms. That is different from the development of formalised research and development activities such as those carried out within university institutions and the research departments of large firms. The process of knowledge creation within KIBS is based on the following sequence:

application of general knowledge to solve the problems specified by the users;a. gradual generalization of the results obtained from application experiences to b. develop new knowledge, both tacit and codified, which represents the base for further applications with new customers and to new problems.In particular, the model of new knowledge creation and the generation of inno-

vation in KIBS differs from the “linear model” which assumes an almost automatic sequence from basic research to applied research to development and to innova-tion. However, it also differs from the “chain linked model” (Kline, Rosenberg, 1986) which envisages a tight relation or feedback between production activi-ties and those of commercialization and research within individual firms. On the contrary, it is characterized by the interaction between different firms and other actors, and it has a “systemic or interactive nature”. In fact, owing to their service or “problem solving” nature, KIBS develop new knowledge and new competences in an informal way on the basis of close relations with their users. This interactive learning process is consequently similar to the innovation process which occurs within a cluster of SMEs (Cappellin, Wink, 2009), or within sectoral supply chains characterized by forms of collaboration (“co-makership”) in innovation between the client and the supplier.

In conclusion, the process of innovation in service activities is differentiated from those in manufacturing industry by two characteristics: a) the close comple-mentarity between process and product innovation, b) the interaction between the new product characteristics and change in the behaviour of the user. A third char-acteristic has a systemic and local nature in that KIBS create the opportunities to innovate for other sectors. In fact, KIBS contribute to changes in the structure of local residents and to the emergence of a knowledge or learning society, thereby inducing changes in needs and the demand for new products or services.

5. The Spatial Concentration and Mobility of KIBS

Service quantity, quality and productivity are more difficult to define and are often uncertain. The input-output relationships of services are different from those of industrial sectors because inputs of raw materials, intermediate products and capital goods are much less important than the labour inputs and the flows of complementary services from other service firms.

Tight interdependence between producers and users is typical of the production of a service, contrary to the case of industrial production, because services cannot be stored owing to their immaterial content. Thus service transactions are also more frequent than goods transactions.

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A large proportion of these interactions, especially in the initial phase of a consulting activity, are characterized by a marked tacit content requiring personal contacts in particular. Service transactions are usually more complex and neces-sitate greater reciprocal trust than do transactions concerning industrial products. Moreover, services often require very special human skills and a high immate-rial investment which may bind the buyer and the provider of the service together (Cappellin, 1989).

Transaction costs are therefore higher for service activities than for industrial firms (Cappellin, 1988; Parr, Wood, 2005) because of the immaterial nature of the output of service firms, and because of the need for a close and active relationship, as well as for bilateral exchanges of knowledge between the supplier and the user in the process of producing a service. In fact, the quality of a service seems to consist mainly in the correspondence between the characteristics of the service provided and the needs of the users.

Proximity (geographical, social, cultural, etc.) is consequently helpful in manag-ing these high-qualified services (Muller, Zenker, 2001). Antonietti and Cainelli (2007) argue that spatial agglomeration may play a significant role in the deci-sion to outsource KIBS. Owing to their characteristics, the relocation of such serv-ices requires the firm to search for highly specialized markets, where high-skilled personnel is particularly abundant, and where informal face-to-face interactions promote the transmission and re-codification of tacit knowledge. Consequently, industrial districts – characterized by relatively close communities and the exist-ence of agglomeration externalities – may be highly attractive geographic spaces for the externalization of knowledge-intensive activities.

This also explains the concentration of KIBS in urban centres. In fact, because transaction costs decrease the lower the geographical distance or the higher the concentration in specific urban centres, cities or central locations have a compara-tive advantage with respect to rural or peripheral areas in services.

The characteristics of the local environment thus affect knowledge creation in KIBS and their quality, competitiveness and growth. KIBS firms are deeply embed-ded in the regional territory and, unlike industrial firms, they can hardly relocate to other regions and countries.

The evolution in the regional location of KIBS has been determined more by the different growth rates of KIBS in the various areas as the result of the different birth and closure rates and the different growth rates of the firms already located in these areas. By contrast, the mobility of KIBS firms and professionals among the various areas is rather limited, and it often occurs across only short distances within the same city or region. Thus explicit relocation decisions by the firms are less important than the implicit location processes related to different growth rates.

The development of service activities corresponds to a model of “endogenous growth” and is mainly the result of local entrepreneurship capabilities. The birth of new firms in the service sector is related to a) the start-up of a new activity by an entrepreneur or to b) diversification into new productions by a firm active in other sectors in the same area or to c) the creation by a service firm active in the same

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sector but in another area. Only in some cases does it correspond to the externaliza-tion of services previously produced in an already-existing industrial and tertiary firm and lead to the creation of a new firm controlled by the parent firm.

The birth of new services occurs mainly in the largest urban centres because it is linked to the pre-existing higher levels of services in those areas. In fact there are no services which are completely new, because the new services result from the autonomous production of services previously produced together with other serv-ices or result from the differentiation of already-existing services so as to satisfy the needs of users in a new way.

A recent characteristic of KIBS is their adoption of a network organization at the regional, national, and in some cases even international, level (Miozzo, Soete, 2001), as in the case of banking services and professional services.

In fact, owing to their immaterial nature and the need for close relationships between the producer and the user, KIBS cannot be concentrated into a single centre. They have consequently created networks in order to extend their market areas, but also to promote collaborative relations and to attract rare and highly-skilled human resources.

Moreover, these networks are characterized by a vertical service differentiation of the participating firms, and they have rather hierarchical structures. Newly-created KIBS firms, or less qualified firms, perform the most routine functions, while larger and more centrally located ones are specialized in the most qualified services, which are demanded by users to solve more complex and new problems. This vertical differentiation of services and the differences in the quality of the service as perceived by its users explain the wide disparities in the productivity, prices and wages of KIBS firms.

6. KIBS and the Changing Hierarchy of Urban Systems

The theories of city systems sheds light on the relationships between spatial interdependence and competition in the location of economic activities. It also brings out spatial diffusion or concentration and regularities in the spatial structure of a region or of a country, these being synonymous with the production specializa-tions of regions and with regional development disparities (Cappellin, 1980a).

Albeit very belatedly with respect to studies on industrial firms, many recent empirical and theoretical studies have greatly developed knowledge about the factors affecting the location decisions of firms in the various service sectors. Central place theories have considered the location of services related to final consumption or consumer services and have indicated the hierarchical character of their location pattern. By contrast, recent studies have focused on the location of producer services, this being determined by intermediate demand rather than by final demand. Various British and Nordic studies (Bryson, Daniels, 1998; Cappel-lin, 1980a) report that information is the most important factor in the production of

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intermediate services, and they have analysed the effect of information technolo-gies on the accessibility needs of these services.

New services may result from the vertical differentiation of service demand because less qualified services may be substituted by new, more qualified and specialised ones, which concentrate in large urban centres. Moreover, a process of vertical and horizontal disintegration may lead to the separation of various services which were previously jointly produced. These new services may choose separate locations and they may concentrate in the largest urban centres (Cappellin, Gril-lenzoni 1983; Cappellin, 1986a).

This process of concentration may be explained with Weber’s agglomeration model when the largest centres are included in the “critical isodapane”, which may be centred on the smaller centres and indicates the distance of the points where the increase in communication costs is equal to the decrease in production costs deter-mined by the concentration of some new services. Otherwise, the higher bid prices that consumers in peripheral areas are willing to pay for services of better quality and greater specialization than the more traditional and undifferentiated ones may compensate for the greater cost due to their transportation from a more distant and larger urban centre. Both these effects are the result of interaction between the higher economies of scale to be exploited in central areas and the decrease of transportation and communication costs.

This process may lead to a “filtering upward” of some services in the urban hier-archy (Cappellin, 1986a). In fact, small cities may lose some high quality services which were previously jointly produced together with less specialized and tradi-tional services or with industrial productions in the same firms.

Figure 1 - A General Model of the Demand and Supply of Services in Different Urban Centres

s2 s1 s1’ s2’

SR2 SR1

DR1’ DR2’

DR1 DR2

p, ac

Source: Cappellin, 1986a

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Moreover, it is possible to demonstrate that the development of service activities does not depend only on demand in the local economy, but also on the capacity to exploit specific advantages in terms of production costs, quality of the labour force, agglomeration economies, access to the communication networks, availability of information, local know-how, and entrepreneurship capabilities (Cappellin, 1989).

As indicated in Figure 1 (Cappellin, 1986a) the supply schedule of a specific service in a smaller urban centre (SR2) may be to the right of the supply in a larger urban centre (SR1) because the same unit labour cost corresponds to a larger per-capita consumption level in smaller centres, since agglomeration economies are important in larger centres. On the other hand, the schedule of the per-capita demand of a smaller centre is located to the left of that of a larger urban centre because smaller centres have smaller hinterlands and market areas. Therefore, in the normal case when economies of agglomeration are relevant, the equilibrium per-capita employment level of a specific service in smaller centres is smaller (s2) than in the larger urban centres (s1). However, in the case of diseconomies of agglomeration, it may happen that the per-capita employment level of a specific service in smaller centres (s2’) is greater than in larger urban centres (s1’) because in these latter centres the unit costs may increase more than the increase in the bid prices which consumers are willing to pay in these larger centres. This model is more general than the central place theory. It may explain why the service level of high-order centres is not zero in small urban centres and it may indicate a non-hierarchical geographical distribution of service activities, since individual small urban centres may specialize in the production of specific services. Usually, larger urban centres have a greater per-capita level of overall services and supply those services with higher quality because they are at the centre of a larger potential market area. While pull factors attract the most qualified KIBS into the central areas, push factors related to cost competition or market segmentation seemingly force the less qualified KIBS firms to locate in more peripheral areas, where costs are usually lower and they can be protected by distance.

Services may be distinguished according the size of the respective market as follows: services exporting their activities at the national and international level, services with an intermediate market which supply regional users, and services selling in a local market and supplying rather routine services (Ciciotti, 1987). This distinction confirms that the location of services is somewhat independent – at least in the case of the most qualified services, such as KIBS – from the location of demand and is instead determined by the availability of supply-side factors.

Ciciotti (1987) applied a model of spatial interaction and a cluster analysis to the urban centres/services matrix – with consideration also of firm size in the case of producer services – and identified various types and a ranking in the case of both consumer services and producer services. This more precise classification of serv-ice activities differs from those commonly used and which are based on product types defined according to various theoretical or empirical methodologies.

This empirical analysis confirms the results obtained by Cappellin (1983 and 1986a) using location quotients of service employment, and it indicates that centres

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of lower rank in terms of population may have a greater service endowment, meas-ured as employees per inhabitant, than centres of higher order. Moreover, smaller urban centres and with smaller service endowments may be specialized in some high quality services. The various urban centres are thus linked by integration relationships because cities of the same demographic size may have different and complementary specializations (Ciciotti, 1987).

KIBS concentrate in major urban centres where the accessibility of regional demand and the supply of skilled human resources are highest. Cities are centres of economies or diseconomies of agglomeration. Transaction costs play a crucial role in explaining agglomeration economies (Cappellin, 1988; Parr, Wood, 2005). The industrial economics literature has investigated the role of transaction costs in relationships between industrial firms and service firms and the trade-off between the vertical integration of service activities within large industrial firms, i.e. the hierarchy solution, and their outsourcing, i.e. the market solution. On the other hand, from a spatial perspective, it is important to analyze the relationships between transaction costs and the size of urban centres and the changing organization of the urban system in a country or region, because transaction costs may affect the trade-off between a concentrated and a dispersed settlement structure. In fact, transaction costs may represent a factor explaining the hierarchy level of the urban system (Cappellin, 1988) different from the concept of economies of scale usually adopted in the central place literature. Transaction costs explain the relationships between larger cities and smaller urban centres because actors concentrate when an overly dispersed location pattern implies excessively high transaction costs.

But also the opposite trend may occur, since various factors may explain the crisis of a too concentrated settlement pattern, given that transaction costs may be higher in very large metropolitan areas. Thus, when the number of firms and house-holds increases above a specific threshold, which may vary according to the sector and the period considered, transaction costs may increase, and this may decrease the “localisation” and “urbanisation” economies. Various factors explain why the most appropriate spatial organization form of transactions in the various service sectors and in the labour market may not be a large metropolitan area but rather a polycentric city-region.

In fact, a network of interdependent and smaller urban centres within a city-region may be more efficient than a large compact metropolitan area when the cost of the transfer and processing of information among firms tightly integrated in a specific production sector becomes very high and unmanageable owing to the congestion existing in a large metropolitan area. Secondly, wider social disparities among local actors may reduce belief in common values, the sense of a shared iden-tity, and the spirit of solidarity with respect to a small or intermediate urban centre. Thirdly, the increase in the number of local firms may lead to a decrease in recip-rocal loyalty and trust between the buyers and the suppliers. This would reduce the incentive to make specific or idiosyncratic investments, binding the two actors or firms more tightly together and thereby slowing down the innovation process. Fourthly, progress in telecommunications, and especially the decrease in cultural,

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organizational, and institutional distances, may determine a decrease in transaction costs between two distant firms and reduce the need for spatial concentration.

Hence cities may have different optimal sizes according to the magnitude of transaction costs (Cappellin, 1988). Different spatial patterns may coexist at the same time, and the urban structure of a country or a region is usually organised by a complex network whereby larger urban centres coexist with small urban centres, and the balance between large and small cities may vary across various countries and periods. Research should investigate the implications of these various factors for the optimal size of cities and for the evolution of the structure of city systems. Urban policies should seek to exploit the potential of decentralization and partici-pation without losing the advantages of diversity and agglomeration.

An urban system may be defined as a dynamic and highly interconnected system where the forms of vertical and horizontal links change according to the evolution of external conditions, and also to the emerging cases of spatial indifference related to the decay of spatial constraints. Cities, like the units in a neural network, are able to process the great quantity of information and knowledge which is produced by the system (Diappi, Ottanà, 1994).

Globalization is accelerating both productive transformations and economic development processes, giving rise to greater specialization and diversity in the economic and territorial system. The urban and regional system has grown increas-ingly polycentric, and regional and urban hierarchies tend to shrink as relations and firm and city networks intensify under the effects of globalization.

There are two processes which explain the diversification of the territorial system. First, the conversion of national urban systems into a European urban system intro-duces change in inter-urban relations, producing greater diversity in the economic, political and institutional functions of cities and regions within a more interactive and closely-related urban system. Second, a greater variety of products and activi-ties reduces the concentration of productive and commercial functions in the largest cities or urban regions because of agglomeration diseconomies. This dynamic may lead to the creation of more flexible urban systems and to a decrease in historical urban hierarchies.

The diffusion of modern ICT communications and the great improvement in international transport – in particular air transport and communication – have favoured the development of medium-sized cities and flattened the hierarchy in urban systems. In Europe, and particularly in Italy, medium-sized cities which once acted only as service centres in support of their respective industrial districts have experienced a remarkable improvement in living standards, so that their life quality is now similar to that in large cities.

A study of the geography of tertiary activities in Italy (Roma, 2007) indicates that the points of excellence in these activities are somewhat scattered across the national territory, rather than being concentrated in the few major cities, and that medium-sized cities have rather large diversified bases of services. Some interme-diate cities have been able to achieve high international openness, and other cities have diversified their strong industrial bases towards new modern business service

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activities. Many cities have successfully organized major events and cultural festi-vals, and this has contributed to the development of lifestyles and services which once characterized only the largest metropolitan areas.

7. The Contribution of KIBS to Urban Development

The economy of cities is characterized by its large-scale specialization in service activities and the higher shilled labour force with respect to the national average. The increasing importance of services in the national economy has been accom-panied by the greater importance of cities; and services perform an increasingly strategic role as the economic bases of cities. Since the massive de-industrialisation of urban economies during the 1970s and 1980s, the economic engine of cities has changed. In particular, cities have anticipated the rest of the economy by undergo-ing profound changes in labour markets and in relationships among firms. Cities are the core of the far-reaching sectoral transformation of the national and international economy into the model of the “knowledge economy”; and the competitive advan-tage of cities and regions is determined by the more rapid adoption of innovation (Wood, 2006; Cappellin, 2007). While most studies have examined the transition to the knowledge economy at the national level, in the various sectors and in the various geographical clusters, still required is better understanding of the workings of knowledge networks within and among city-regions and in modern knowledge-intensive service (KIS) activities.

Services are a key factor in making a city attractive and competitive. A city should become able to respond innovatively and efficiently to the increasing and chang-ing demand for goods and services by its citizens as new needs emerge in various fields, such as education, health, welfare assistance, environment, free time, and mobility. This is also important in the medium-sized urban centres of peripheral areas because the provision of modern services to industrial firms is necessary for global territorial competition (Bailly, Maillat, 1989). Moreover, services have a key role in the organization of the tight networking among a city’s various stakeholders which represents a factor in a city’s competitiveness and has complex social and economic impacts on urban development (Senn, 2007).

In general, cities perform six different roles within the economy, society, and territory: they are centres of agglomeration and urbanization economies, incuba-tors of innovation, gateways to interregional links, centres of a shared culture and identity, living environments, and political and administrative centres. The rela-tionship between services and the urban economy can be analysed in each of these six different aspects. First, cities are centres of agglomeration due to the work-ings of economies of scale in services and the close interaction among the various specialised services. Moreover, according to Jacob’s concept of urban externalities, the larger market for services in cities allows for greater specialization and a higher diversification of the various services provided. This effect relates to the function

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of cities as incubators of innovation (Cappellin, 2007) and to the creation of new firms in various KIBS sectors.

Third, cities are characterized by a strong identity and common culture which increase trust among economic actors and decrease transaction costs in exchanges among the various specialized KIBS firms (Cappellin, 1988). This increase in geographical and cognitive proximity facilitates the transfer of knowledge (Antoni-etti, Cainelli, 2007; Koch, Strotman, 2008). Fourth, cities are gateways for inter-national and interregional communication, and KIBS are located in cities because of their greater openness to international relations, flows of specialized knowledge, and access to a wider regional and interregional market.

Fifth, cities are also living environments, and they comprise pools of skilled labour owing to the preference of high-skilled workers for urban lifestyles (Wiig Aslesen et al., 2004). Citizens and firms within cities are users and consumers which express new needs and demand for new products and services (Cappellin, 2007). In fact, the close connection between potential clients expressing new complex needs, on the one hand, and firms and organizations endowed with advanced capabili-ties and open to forms of collaboration with other firms and organizations, on the other, is a powerful stimulus to innovation. Thus cities are also lead markets which furnish crucial opportunities for the development of new economic activities and the birth of new firms.

Finally, cities are administrative centres, and the development of KIBS is closely related to the governance functions of public administrations, given that these latter regulate the field of KIBS activities and require KIBS as intermediaries (Miles et al., 1995) in the management of relations between the public sector and private industrial firms. In fact, urban services, and in particular public utilities or network services, require strong relationships between the public and private sectors if they are to be produced efficiently (Senn, 2007).

Services are a key policy field in which to promote the vitality of urban centres. However, urban policies and spatial planning may also be key instruments for the development of knowledge-intensive services (Cappellin 2007). They are impor-tant not only in the organization of the physical dimension through, for example, the creation of office buildings and of interregional transport infrastructures, but also for the introduction of urban public services which may improve the quality of urban living and the attractiveness of cities to high-skilled workers.

Urban policies may promote the development of knowledge and innovation networks within a city-region and close economic integration between industrial and service firms, and among service firms. Urban policies should focus on the various structural characteristics of knowledge networks, such as the intensity and nature of knowledge and information flows. the characteristics of the nodes such as firms, public administration, consumers, associations, geographical areas – the efficiency of the soft and hard infrastructures or bridging institutions facilitating interactions, the actual form of the networks in the various sectors and city regions, and the change and long-term trends in the form of those networks.

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Strategic fields for policy intervention, and also for future research, are the connections between, on the one hand, labour demand by industrial and service firms characterized by increasing requirements for flexibility, relational skills, intersectoral openness, autonomy and self-responsibility, and on the one hand, the labour supply, characterized by new skills and professional curricula, and the new needs and demand for new products and services expressed by users and urban residents.

In conclusion, urban policies and future research should focus on problems which may hinder the development of modern knowledge-intensive services in urban areas, such as the existence of many new but only scattered needs, and the segmentation of local markets for new goods and services, low accessibility due to traffic congestion, low receptivity due to differences and excessive cognitive distances, tensions and conflicts, scant common identity due to deep diversities, fragmentation and high population mobility/turnover, low creativity due to the predominance of a short-term speculative perspective and a lack of long term commitment, poor governance capabilities due to a lack of coordination and the fragmentation of decision-making bodies.

8. Conclusions

This study has sought to tie together the dimensions of the contribution made by KIBS to innovation in client firms, SMEs in particular, innovation within KIBS themselves, and spatial proximity in KIBS development. In particular, it has sought to identify the role of Italian contributions to the international literature.

According to a recent international survey (Mueller, Doloreux, 2007), Italian contributions have been, together with those by British and French authors, the most frequent in the European literature on KIBS since its beginnings in the early 1990s. In particular, since the pioneering studies on definition and measurement of KIBS (Momigliano, Siniscalco, 1980), Italian researchers have contributed by focusing on the role of intermediate demand and on the complementarity between KIBS and tertiary activities within manufacturing firms (i.e. “implicit services”) and the role of service occupations both internally and externally to industry (IReR, 1979; Cappellin, 1980b; Boscacci et al. 1986).

While Italian studies on KIBS have dealt with the issues of innovation and agglomeration considered in various other international contributions, they are characterized by a close relationship with the Italian literature on industrial econom-ics and regional economics, focusing on the key role of manufacturing SMEs and industrial clusters (Capitani, De Maria, 2000; Antonietti, Cainelli, 2007). In partic-ular, Italian studies have been among the first to establish a link between industrial and geographical research on KIBS with the new studies on knowledge creation (Antonelli, 1998 and 1999; Rullani, 2005 and 2006; Cainelli et al. 2006) and on localized processes of collective learning and networking.

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Unlike the international literature mainly focused on the industrial and techno-logical dimension of producer services, Italian research has extensively considered the regional and urban dimension of producer services (Cappellin, 1980a and 1986a; Ciciotti 1987; Diappi, Ottanà, 1994). Moreover, while to date international authors have only attempted to analyze the location of KIBS and the factors explaining their emergence and growth, various Italian studies have explicitly avoided identi-fication of the growth of KIBS with the role performed by major city regions with a significant and increasing global reach. Rather than merely highlighting the urban concentration of KIBS, Italian studies have explicitly related the spatial diffusion of KIBS to the complex and flexible relationships between larger and smaller urban centres (Cappellin, Grillenzoni, 1983; Cappellin, 1986a and 1988; Ciciotti, 1987) and the changing structure of national and European urban systems, making explicit reference to the well-known theories of urban hierarchy. They have shown not only the role of urban agglomerations as seedbeds for KIBS concentration but also the effects of urban agglomeration diseconomies in favouring smaller cities, and especially the functions performed by KIBS in the economic and social devel-opment of cities. The development of KIBS has been explicitly related not only to spatial proximity to clients but also to factors operating on the supply side, such as transaction costs, exchanges of tacit knowledge (which represent the key input to KIBS), emerging occupations in local labour markets, and in general the structure and configuration of regional knowledge bases.

While Italian research on KIBS in the early 1990s was based on empirical surveys conducted on various industrial and metropolitan regions, unlike in other countries, and Germany in particular, still lacking in Italy is extensive national empirical research based on a large sample of KIBS firms. And the recent evolution of KIBS in Italy has still to be examined, notwithstanding the increasing role of the tertiary sector in determining the overall growth of employment and product in an emerging knowledge economy.

Finally, a further area for future research is indicated by the persistent failure of both the international and Italian literature to provide guidelines on the role that regional policies and especially urban policies may perform in promoting KIBS, which are a major component of a modern economy, and how to use KIBS as means to promote social and economic development, regional international competitive-ness, and urban quality.

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Part 3. Urban Economics, Models and Regional Economic Planning

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Scienze Regionali Vol. 8 – n. 3, 2009, pp. 127-150 Thirty Years of Regional Science in ItalyItalian Journal of Regional Science Special Issue

Agglomeration, Hierarchy, Urban Rent and the City

Roberto Camagni*

(Paper first received, July 2009; in final form, September 2009)Abstract

The paper fucuses on Italian contributions in the field of urban economics, mainly from a theoretical and empirical point of view. The Italian tradition is characterized by a constant conceptualization effort of the city as a socio-economic archetype, an original historical organizational model of labor, activities and society; the approach generally merges mainstream, mainly neoclassical, tools with more heterodox, evolu-tionary but also classical economic concepts. In more specific fields, relevant advances were achieved in the theorization, measurement and simulation of optimal city size; in the interpretation of the urban crisis à la Baumol, considering inter-sectoral but also inter-regional exchange relationships; in the analysis of urban forms and their impact on sustainability and social welfare; in dynamic modelling of the urban hierarchy and the theorization of city-networks, based on the advantages of synergy and division of labour; on a proper understanding of territorial competitiveness and the nature of urban land rent.

Keywords: urban economics, competitiveness, urban land rent, agglomeration

JEL Classification: R12, R14, R15

Agglomerazione, gerarchia, rendita urbana e la città(Articolo ricevuto, luglio 2009; in forma definitiva, settembre 2009)

SommarioL’articolo considera il contributo degli scienziati regionali italiani allo sviluppo di

una teorizzazione economica sulla città. Una costante dell’approccio italiano è sempre stato una concettualizzazione della città come archetipo spaziale, un modello storico di organizzazione del lavoro e della vita sociale; l’approccio complessivo ha messo insieme strumenti dell’economia neoclassica e soprattutto dell’economia classica, stru-menti concettuali ortodossi ed eterodossi, evolutivi. Le concettualizzazioni più gene-rali sono andate, nel tempo, dalla città come riduttore di costi di transazione alla città come milieu; dalla città come sistema complesso di auto-organizzazione alla città come dispositivo cognitivo. In campi più specifici, i contributi più rilevanti, sono stati appor-tati nel campo della dimensione urbana ottimale, della crisi urbana alla Baumol, nella teorizzazione di modelli di organizzazione urbana a rete.

Parole chiave: economia urbana, competitività, rendita urbana, agglomerazione

Classificazione JEL: R12, R14, R15

* Department of Management, Economics and Industrial Engineering, Politecnico di Milano, Piazza Leonardo da Vinci 32, 20133 Milano, Italy, e-mail: [email protected].

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1. Introduction

As in many other fields and subjects of regional science, Italian scholars have participated intensively in the international debate on the nature, internal structure and evolution of cities and the urban system, contributing to the advancement of both scientific reflection and empirical research. Since pioneering models of urban growth à la Tiebout and Czamanski the 1960s and 1970s, through the years of fascination with spatial interaction models (1970s and 1980s) in both their static and dynamic specifications, until the more recent self-organization and multi-agent approaches, Italian scholars have made contributions in almost all fields. Of course, in many cases, studies have been co-authored with scholars from other countries.

Leaving critical presentation of mainly methodological contributions to other surveys in this issue (namely by Lidia Diappi), the focus here is on studies that have dealt principally with economic aspects of the urban realm. These studies have many important features in common.

Constant theorization of the city as a socio-economic archetype, an original his- -torical organizational model of labor, activities and society. Rather than the sim-ple application of economic tools and spatial models to the interpretation of the city structure and performance, a more general understanding and conceptuali-zation have been pursued, even if only partially achieved. The first and still only textbook in urban economics (Camagni, 1992) written by an Italian – the present writer – presents the five “principles” that explain why, where and how a city exists and grows. In this regard, two important workshops have been organized at a distance of ten years: the first in 1995 in Perugia on “The City as a Highly Complex Entity” (Bertuglia, Vaio, 1997a), and the second in 2006 in Venice on “The Interpretation of the City in Urban Economics” (Cusinato, 2007a). Stressed in both cases was the need for a concise but at the same time multi-faceted and complex interpretation of the urban phenomenon. The above-cited textbook started with a quotation from Fernand Braudel, the great French historian who constantly emphasised the role of cities in the history of civilization: “a city is a city”, a statement that justifies the city’s theorization as an autonomous socio-economic entity and an interpretive paradigm of reality.Constant and marked inter-disciplinarity stimulated by the presence and specific -goal of the Italian Regional Science Association. Most of the important contribu-tions to urban theory have been co-authored by geographers, economists, plan-ners, systems analysts, sociologists and political scientists. And in many cases the merging of different disciplinary approaches has yielded the most innovative results.The merging of mainstream, mainly neoclassical, economic approaches with -more heterodox, evolutionary but also classical economic approaches, giving rise to more comprehensive visions of the processes analyzed. The city (like the territory) is frequently considered to be a sort of collective economic concept, or even a collective agent, extending beyond the traditional methodological indi-vidualism of mainstream economics which considers individual agents alone: “if

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individual firms and individual people undertake collective activities, facilitated by (and creators of) trust and local social capital; and if significant cognitive synergies, readily apparent in the local milieu, result from their various interac-tions; and finally if these actions and these processes draw additional vitality from cooperation with local public administrations; then it appears justifiable to go beyond methodological individualism – which regards only single firms and individuals as operating and competing – arguing the logical validity of a ‘col-lective’ concept such as that of territory [and city], and to affirm that territories [and cities] compete among themselves, using the creation of collective strate-gies as their instrument” (Camagni, 2002, pp. 2406).The implicit, but also explicit, general goal has been to close the gap with

respect to the general powerful representations and conceptual pictures of the city that other disciplines have been able to furnish, but which economists have been unable to provide (or have been uninterested in doing so?). Never in the history of economic thought have there been such enlightening interpretations of the city as Hegel’s definition of the city as “the locus of reflexive and self-realized thought” as opposed to the countryside, the “locus of ethical life, founded on nature”; or Marx’s notion of the contradiction between city and countryside as the expression of the contradiction between intellectual and manual work; or Max Weber’s consideration of the urban “air” as conducive to the freedom and self-realization of individuals (Camagni, 1992, Introduction).

Of course the difficulty of achieving this general goal has by no means been the only one preventing Italian scholars from contributing to more specific subjects and issues. In what follows, after a brief presentation of the most thoughtful general interpretations and conceptualizations of the city (section 2), the contributions of Italian scholars will be discussed by following the sequence of the “principles” of urban economics already mentioned (Camagni, 1992): agglomeration (section 3), accessibility and spatial interaction (section 4), hierarchy (section 5), and competitiveness (section 6). A specific section will be devoted to urban land rent theory (section 7), and a final one will draw some conclusions and outline future prospects.

The interest of Italian economists in cities is recent and rare. Only two schools have been involved across a sufficiently long time span: the Milan school (Camagni, Capello, Cappellin, Curti, Faggian, Pompili, frequently in collaboration with non-economists such as Diappi, Leonardi, Gibelli, and Dematteis) and the Venice school (Becchi Collidà, Costa, Cusinato, and Martellato). Although they do not comprise economists, the Turin schools of geographers (Dematteis, Emanuel, Conti, Governa), planners (Bertuglia, Rabino, Ocelli, Tadei) and sociologists (Bagnasco, Mela, Preto) should be mentioned for their multiple international and inter-disciplinary interactions, while other individual economists involved in urban issues work at Ancona (Calafati), Piacenza (Ciciotti), and Bologna (Reggiani).

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2. What Is a City? Conceptualization and Complexity

Different proposals have been put forward as to how the city can be interpreted in concise and theoretically meaningful terms as a typical, trans-historical organi-zational form of society and economy. A temporal but also logical sequence may be used to present the most interesting ones, those that go beyond the simple descrip-tive phenomenological approaches built around urban density, agglomeration and size.

The city as an operator (a. dispositif in French) whereby transaction costs can be reduced thanks to geographical proximity, in a static efficiency framework. Cap-pellin (1988) interestingly emphasised that in this respect urban size may be subject to both increasing but also decreasing returns above a certain threshold, because interactions and exchanges may suffer from the congestion costs and transport costs of the large metropolis. This explains the survival and success of medium-sized cities.The city as a b. milieu oriented to continuous innovation: an operator which, by virtue of not only geographical but also cognitive proximity, enhances dynamic efficiency and innovation through the (socialized) reduction of uncertainty and collective learning processes (Camagni, 1991, 1999 and 2004; Camagni, Capel-lo, 2005). The city as a highly complex system of internal/external relationships which can c. be only be grasped if the purely structural/functional control-oriented paradigm is superseded with a new evolutionary approach utilizing complexity theory and oriented towards interaction games, social learning and new form creation (Bertuglia, 1991; Bertuglia, Vaio, 1997b, Introduction). The multiplicity of non-linear interactions among numerous actors and decision-makers, the multiplicity of organizational levels, the multiplicity of city times as perceived by the differ-ent actors, the multiplicity of the relevant dimensions – from the economic to the social, political, cultural and physical – all these generate a multiplicity of non-reducible interpretations which only the complexity paradigm can accom-modate and integrate (Diappi, 1983; Mela, 1985; Mela et al., 1987; La Bella, 1997; Bertuglia et al., 1998; Bertuglia et al., 1990). Modeling the city system in accordance with this new paradigm means discarding deterministic models (à la Lowry and early Wilson) suited to the city of the twentieth century – the Ford-ist city of the working class, electricity and center/periphery commuting – for stochastic models suited to the city of the twenty-first century – the city of the self-employed and the creative class, of non-systematic internal movements, of synergy and multiple interaction (Bruzzo, Ocelli, 2004).The city as a self-organizing system. This is the most complete outcome of the d. previous approach and explains the consistency and persistency of urban sys-tems even as they evolve into new forms, functions and organizational struc-tures in an unstable context (Lombardo, Rabino, 1989; Lombardo, 1991; Di-appi, 1993). The reference for translating the new paradigm into a formalized theoretical model is of course the well-known Allen and Sanglier model (1979).

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Italian studies have added to this model a substantial dimension consisting in the acquisition/development of (urban) innovations – which were previously treated in quasi-mechanistic manner by linking the new urban functions automatically to increases in city size. The family of SOUDY (supply oriented urban dynam-ics) models depict both deterministic and structural dynamics for each centre in a urban hierarchy. They define a logistic growth path within each urban rank by means of a system of differential equations and a series of stochastic structural changes through a master equation. In this way a Schumpeterian element has been added to more general self-organization models (Camagni et al., 1986; Diappi, Pompili, 1990; Camagni, Diappi, 1991). The probability of the acquisi-tion (but also the loss) of higher functions allowing each city to change rank is proportional to the extent to which a market potential threshold defined for each of these functions is surpassed (the “appearance threshold”: A0, A1, A2 in Figure 1 for functions 0, 1, 2 respectively), giving rise to structural instabil-ity (present, for example, in the interval A1 – A0’, where a city showing func-tion 0 may acquire function 1, but a city with function 1 may easily miss it). More recently, Calafati (2007) has used systems theory to interpret the city, its “progressive” character and self-organization capacity, as the result of the mis-match and the ambiguity between the incomplete and changing relational fields (and relational maps) of individuals, defined in conditions of bounded rational-ity, and the potential relational maps arising from the complexity of the urban realm. The learning capacity of individual actors but also the presence of con-sistent governance and policy-making styles are crucial in this process.

Figure 1 – Efficient Urban Sizes for Different Urban Functions

A0 A1 A0’ A2 A1’ A2’ Urban size

Average production profits Average location costs

ALC

APP – F2

APP – F1

APP – F0

Source: Camagni et al., 1985; Camagni et al., 1986.

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The city as the locus of the knowledge economy (Capello, 2001; Camagni, 2004; e. Cappellin, 2006 and 2007). The changes in technologies, production cycles and organizational forms which have accompanied the transition from a Fordist to a knowledge paradigm require production factors and context conditions which are new with respect to the past and can be easily and substantially found in the city: not just in the form of human capital, advanced industrial and service activities and specific competencies, but also in the development of relational networks and a cognitive climate conducive to receptivity and openness to innovation, collective learning and creativity. But the logical chain linking technological transforma-tion and spatial structure is by no means mono-directional: new technologies and organizational forms do not “choose” their spatial context; rather, they develop intrinsically together with the spatial context and thanks to it (Cappellin, 2006). Just as tacit knowledge is becoming more important than codified knowledge in continuous innovation processes, so the circuits of dialogical communica-tion – involving human intervention and subject to the continuous devising of new interpretive codes and relational strategies – are increasingly separated from syntactical communication circuits increasingly utilized by self-regulating machines and expert systems. Whilst the latter appear more and more footloose, the former increasingly require special territorial conditions: the flexibility and openness of relational networks, the heterogeneity of interpretive codes, com-binatory capabilities and institutional support. The city is simultaneously the natural stage on which these developments happen and the territorial context and precondition necessary for their very existence (Cusinato, 2007a, Introduction). The city as a cognitive f. milieu, a producer of multiple codes and a trans-coder of noise (and dissonance) into information and resources (Cusinato, 2007b). By virtue of the diversity of the city’s production fabric and its pop-ulations, the specialization of activities, the presence of multiple and re-peated contacts (and contracts), the noise emitted by the multiplicity of non-directly integrated languages, values and messages is more easily de-coded, interpreted and utilized as new information for innovative purposes. On this interpretation it is possible to give more solid conceptualization to the many fashionable interpretations of the city as a creativity milieu à la Florida (2005) hosting the creative class thanks to its functional diversification, readi-ness to embrace innovative styles and behavior, and the attractiveness of its built and social environment (Camagni, 2007).All these interpretations seem to have evolved into each other in the course of

time, and to complement each other even though they pertain to different interpre-tive paradigms and logical approaches. The present writer has proposed a theo-retical taxonomy synthesizing the different roles of the (large) city by crossing-referencing possible spatial logics and cognitive logics (Camagni, 2001). In terms of spatial logics one can distinguish between territorial approach and a network approach; in terms of cognitive logics, one can distinguish between a functional approach and a symbolic approach. The intersection of these logics gives rise to an interpretive taxonomy comprising four different roles of the city (Figure 2): the city

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as cluster, the city as interconnection, the city as a milieu, and the city as a symbol (or a creator of symbols).

Figure 2 - The Roles of Global Cities: a Theoretical TaxonomySpatial Logic

⇒CognitiveLogic ⇓

TerritorialApproach

NetworkApproach

City as Cluster City as Interconnection

Functional(substantive) Approach

diversification and • specialization of activitiesconcentration of • externalitiesdensity of proximity • contactsreduction of transaction • costs

city as a node in • multiple and interacting transport, economic and communication networkscity as interconnection • between place and node

City as Milieu City as Symbol

Symbolic(procedural) Approach

uncertainty-reducing • operator through:

transcoding of information ◦ex-ante co-ordination ◦of private decisions (collective action)substratum for collective • learning

city overcoming of time and • spacecity as symbol of territorial • controlcity as producer of symbols, • codes, and languages

Source: Camagni, 2001

3. Why the City? Agglomeration, Proximity, Synergy

This research field is probably the one to which Italian scholars have made most contributions. The nature of agglomeration advantages, the existence of an optimal city size – in terms of economic performance, wellbeing of citizens and sustainabil-ity – the advantages but also the potential limitations arising from the city’s tertiary specialization along the well-known lines of Baumol’s model of the “anatomy of urban crisis” (Baumol, 1967) – a subject that opens up the largely unexplored field of income distribution in space – are just the major issues on which Italian scholars have obtained important and convincing results.

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3.1. Marshall vs. Jacobs: What Results?

The issue of the prevalence in the city of localization (intra-industrial) economies versus urbanization (inter-industrial) economies – i.e. of synergies linking activi-ties operating within individual sectors versus pure generalized urban externalities on any production sector – is by definition an empirical matter. And like many other empirical issues it has no definitive answer, because the empirical results are tied to specificities of time, space and activities, and to the methodological approach used. The limited availability of data in Italy, and in particular of geo-referentiated data bases, has prevented in-depth, accurate and breakthrough approaches such as those used in other countries (Ellison, Glaser, 1997; Ciccone, 2002), and they have restricted Italian scientific inquiry to mainly incremental findings.

Working on a direct interviews database and estimating a translog production function at the firm level in Milanese high-tech sectors, Roberta Capello (2002a) has found that, although both localization and urbanization effects exist and are positive, labor productivity increases along with firms’ appreciation of localization economies, while the opposite holds for urbanization economies. Interestingly, firm size plays an important role: the bigger the firm, the larger the effect exerted on labor productivity by urbanization economies, while small firms benefit more from localization economies.

This result would have appeared rather strange some decades ago. According to a well-known article by Chinitz on “contrasts in agglomeration” (Chinitz, 1961), cities characterized by the presence of mainly large firms are expected to develop a lower quantity and quality of services because of these firms’ tendency to internal-ize many tertiary functions. Hence these cities are likely to develop less in the long run than more competitive cities which supply small firms with a wider variety of needed services. This proposition has proved true in the case of Italy, given the performance of cities like Milan (small, competitive firms) and Turin (mainly large, oligopolistic firms) (Camagni, Mazzocchi, 1976). Evidently, under the new knowl-edge society paradigm, also large firms must rely on external assets and services provided by public institutions or other firms, and they must develop external link-ages and relations with complementary activities. In their turn, small firms build their competitive strength primarily through collective learning processes concerned with specific competencies and technological filières inside compact territories constituting districts and milieux often located in cities (Camagni, 1999).

3.2. On Optimal City Size

The international literature comprises a vast array of studies and approaches concerning the existence of an “optimal city size”. Analyses on urban costs connected to size, the presence of scale economies and diseconomies, analysis of productivity levels according to urban size through the estimation of production

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functions at the aggregate, sectoral or firm levels: all these attempts have been care-fully inspected and compared (Capello, 1998).

The main criticism brought by the Milan school against the optimal size hypoth-esis centers on three main arguments. Firstly, it would be better to speak of “effi-cient size interval” rather than a unique optimal size, an interval in which urban costs are lower that urban benefits. Secondly, such intervals differ from city to city according to their main functional role, because urban benefits in particular are closely connected with the specificities of the economic functions involved (scale economies, market structure). This element is indicated in Figure 1 above by the different efficiency intervals for each type of city (A0-A0’ for cities with the lowest-order function, A1-A1’ for cities with higher function 1, etc.) (Camagni et al.,1985; Camagni et al., 1986). Thirdly, cities are not located on a homogeneous plane but belong to urban systems which provide them with wide externalities but also impose constraints concerning functions to be attracted: a small city on the edge of a large one behaves differently from an isolated one. Moreover, cities may develop network linkages with other similar cities in order to acquire critical mass in product markets while maintaining a limited size (see below).

These criticisms have been borne out by empirical analysis (Capello, Camagni, 2000) in which the benefits and costs of urban size were estimated by a trans-log function on a complex indicator of “city effect” (encompassing economic but also environmental performances) and on a complex indicator of costs – “urban overload”.1

The findings were of considerable interest (Capello, Camagni, 2000):traditional “optimal” sizes were estimated, for Italian cities, as 55,000 inhabit- -ants as regards costs, and 360,000 inhabitants as regards benefits, results in line with the main international estimations;when higher-order functions are present, approximated by tertiary activities, -urban benefits grow at an increasing rate, and also costs increase, though at a decreasing rate; the starting point of general agglomeration diseconomies is pushed well beyond the two indicated optimal size points;when cities are linked by cooperation networks, a similar effect arises, whereby -benefits increase at a faster pace than costs.The fact that a kind of optimal size exists but is different for each city according

to its internal characteristics has been shown by Capello (2002b) on utilizing urban land rent as an indicator of urban efficiency and attractiveness. In the long term, cities appear to grow towards their optimal size, which constitutes the attractor of their evolutionary path.

3.3. Urban Crisis or Urban Success?

Baumol’s well-known model (1967) on the anatomy of urban crisis, linked to stagnant productivity in services compared with the rise of salaries, has given rise to numerous interesting reflections.1. This evocative terminology is taken from Franco Archibugi (2001).

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Cusinato (2007c), who maintains Baumol’s original hypotheses, contrary to many successive refinements by other authors, contends and demonstrates that if activities of the stagnant sector influence the growth rate of labor productivity in the progressive sector, the aggregate growth rate of the city may be positive over time in conditions of balanced growth. Hence the “stagnant” sector, and the city, assumes a propulsive role rather than the parasitic one emerging from the original model.

Aydalot and Camagni (1986) took a partially different perspective by analyz-ing income distribution between the city and the non-city, the countryside. The city cannot be interpreted as a closed system, as in Baumol’s model, because it is inherently an element in the social (and spatial) division of labor. If urban services, considered as intermediate goods for industrial production, are able in their trade with the industrial countryside to transfer cost increases into prices, even in the presence of stagnation of total service production in the long run, the real value of these services in terms of agricultural and industrial goods increases. Thanks to a favorable trend in the terms-of-trade between the city and the countryside, the city may benefit from an increase in its income and purchasing power, avoiding its crisis in spite of the stagnation of its real contribution to total GDP. This is what is meant in Marxian economics by the “contradiction between city and countryside” or in modern terms, by the inflationary nature of the city. Aydalot and Camagni tested three hypotheses: perfect specialization of the two territories and labor mobility (the city grows in size and appropriates the entire GDP in monetary terms); imper-fect specialization and labor immobility (the city does not grow in size by definition and postpones its stagnation in time); and comparative advantage of the city in the production of services (the city may exploit this advantage by imposing even higher prices and terms-of-trade with respect to the previous competitive cases).

Maintaining the idea of two complementary territories, city and countryside, or urban core and ring, and assuming different (but likely) hypotheses on the productivity and wage ratios between the secondary and tertiary sectors along the long-term technological cycles of the post-war period, Curti (1986) showed that Baumol’s model can easily accommodate and interpret the main urban-life cycles (Klaassen, Scimemi, 1981; Van den Berg et al., 1982) evident in Italy, so that a scenario of re-urbanization was plausible.

3.4. Urban Size and Urban Form: Towards Urban Sustainability

During the 1980s and 1990s many Italian scholars working in different disci-plines joined the international debate and searched for an appropriate measure-ment of the urban condition. In the first period, the main problem was defining urban and metropolitan areas (Sforzi et al., 1982; Sforzi, 1990; Costa et al., 1990; Cafiero, Cecchini, 1990; Martellato, Sforzi, 1990) following the pioneering studies and methodologies on Daily Urban Systems (Berry, 1973), Metropolitan Economic Labour Areas (Hall, Hay, 1980) and Functional Urban Areas (Cheshire, Hay, 1989).

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During the 1990s, the issue of urban form – compact versus sprawling – was taken up with reference to definition of urban sustainability: given the artificial nature of the city and its historical role of facilitating human interaction, a definition arising from natural contexts proved unsuitable, while one based on the co-evolution and positive interaction between the economic, social and physical subsystems seemed more appropriate and fruitful, particularly with reference to the complex environ-ment/growth nexus (Camagni, 1998). Efforts were made to measure urban form, in both theoretical and empirical terms, using a fractal geometry (Diappi, Bolchi, 1993) or other statistical methods (Camagni et al., 2002). This latter work was probably the first econometric analysis in Europe to link urban form with urban sustainability, showing the impact of sprawl and low density settlements on land consumption and mobility by private means and the advantage of compact, diversi-fied and mixed urban tissues.

4. Accessibility and Spatial Interaction

Italian works on accessibility and spatial interaction have concerned themselves mainly with methodological aspects rather than conducting purely theoretical reflection (in particular concerning neural networks and cellular automata mode-ling); therefore I prefer here to redirect the reader to the review by Lidia Diappi in this volume.

Only a few remarks are relevant, however. Firstly, in regard to the endeavour of the new urban economics to build a comprehensive theoretical model of the city and the system of cities by working only on the accessibility principle à la von Thünen – Alonso – Fujita (Fujita, 1989), it is the present writer’s belief that if a unique production function is used for all cities, and therefore a single way to consider increasing returns to urban scale both in the “open city” and the “closed city” model, an urban system will be produced with all cities sharing the same size (Camagni, 1992, sections 6.5-6.6). This counter-factual result can be removed either with ad hoc hypotheses – like Henderson’s (1985, chapter 2) of a different sectoral specialization of individual cities – or, better, by making use of a second principle, that of agglomeration, which cannot be reduced to the accessibility prin-ciple. This principle has to be added to the theoretical model, so that the challeng-ing but probably impossible hypothesis of a unique force shaping the urban realm is relinquished.

The second theoretical advance concerns Giorgio Leonardi’s well-known demonstration of the asymptotical equivalence between the entropy spatial inter-action model and the microeconomic model of discrete choice based on random utility theory (Leonardi, 1985).

In regard to spatial interaction models, the Garin-Lowry models first began to be used in Italy during the mid-1970s (Bertuglia, Rabino, 1975; Costa et al.,1976). One of the earliest reviews of the entropy derivation of the model and its early refinements was Camagni (1977). Thereafter, with the creation in 1980 of the

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Italian section of the Regional Science Association, advances and contributions became frequent and important (see Diappi’s paper in this volume).

5. Hierarchies, Networks and Structure of Urban Systems

Italian scholars have made important contributions to the study of urban hierar-chies and urban systems in terms of both empirical analyses and theorization.

The most consistent and complete application of the central place model to the Italian urban system has been made by Ciciotti for the SOMEA Atlas (Somea, 1973). Christaller’s approach was widely adopted, and the full urban hierarchy was defined in terms of the presence of tertiary functions through cluster and factor analysis. Subsequently, Cappellin conducted thorough inspection of service activi-ties in Italian cities. He reached the conclusion that major centers were highly specialized in high-order functions, and to a much greater extent than expected by traditional theories. This finding was explained through consideration of not just, as usual, demand and supply conditions, but also of cost conditions deriving from the urban context, where rent costs and diseconomies of urban scale work as crowding out factors with respect to lower-order functions (Cappellin, Grillenzoni, 1983; Cappellin, 1986).2 On the other hand, in regard to the European urban system, to be cited is the first empirical analysis conducted on the top cities in Central and Southern Europe by means of a battery of international indicators on urban func-tions (Camagni, Pio, 1987) – a method which was subsequently used throughout Europe, with the studies by DATAR and RECLUS in France, and by Peter Taylor in the UK, and those by Conti and Spriano (1990) in Italy.

5.1. A Dynamic Approach to Urban Hierarchy

The already-mentioned family of supply-oriented dynamic models of the urban hierarchy yielded important insights into the genesis and dynamics of the urban system. In particular, through the first SOUDY 1 model of urban self-organization (Camagni et al., 1985) it was possible to show that:

the true growth of cities follows a structural dynamics, a stochastic path encom- -passing urban innovation and the acquisition of new and higher functions;if a fully-developed urban hierarchy is going to show up through model simu- -lation, a condition of increasing returns to urban scale is crucial: subsequent higher-order functions, potentially appearing only above certain size thresholds, must provide increasing net production benefits if increasing urban costs are to be overcome.

5.2. Urban Hierarchies and Urban Networks

A specific and most interesting contribution by Italian scholars to urban analysis regards the theorization of urban networks. The pioneering idea was launched by

2. See also Cappellin’s review on knowledge and the knowledge economy.

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the Turin geographical school (Dematteis, 1985, 1990; Emanuel, Dematteis,1990) with the following content:

thanks to district economies and the reduction of minimum efficient production -size for many industrial products and services, medium and upper functions can today locate outside large cities and metro areas;in modern urban systems, the traditional hierarchy - à la Christaller persists but simplifies into three or four ranks;within these ranks, numerous centers of similar size coexist, without any hier- -archical dependency, by virtue of different specializations and wide inter-urban interactions;when centers of similar size and different specializations are located close to -each other, they are supposed to form an urban network (“reticolo”).This seminal idea, which seemed an interesting conjecture in search of theo-

rization and empirical corroboration, was taken up by the Milan school, with the following results:

city networks, understood as systems of relationships and flows of a mainly -horizontal and non-hierarchical nature among complementary or similar cen-tres, find their economic rationale in the provision of externalities or economies respectively of specialisation/complementarity/spatial division of labour and of synergy/cooperation/innovation. In the former case one speaks of “complemen-tarity networks”; in the latter, of “synergy networks” (Camagni, 1993). In prac-tical terms, the networking process comes about through transport and logistic integration, cooperation in multiple fields, single location of high order func-tions or facilities without their being replicated in the small scale of the single city, organisational and informational integration (as for example in tourist cities organized into integrated itineraries). The twofold advantage provided by the network is that it enables achievement of a higher market size and critical mass – whereby some excellence functions become profitable – while maintaining the limited, and certainly more sustainable, size of the single centers.these networks may be visible in empirical terms when inter-city interaction -(e.g. telephone calls) is far greater than that expected on the basis of an entropy spatial interaction model. This method made it possible to identify city networks in Northern Italy in two main cases: in district areas characterized by huge inter-action and cooperation, and in the metro area of Milan, with an initial polycen-tric organization (Camagni et al., 1994; Camagni, Capello, 2004);reduction of transaction costs, common infrastructure provision, cooperation in -technology and culture and political diplomacy were indicated as the main goals of long-distance inter-urban networking (Cappellin, 1988, 1990 and 1991);an international network of cities, namely the Healthy Cities network, was ana- -lyzed with econometric and clustering methodologies in order to identify forms of network externalities or network surplus. Different behavioral styles were found: opportunistic behavior (only political legitimacy for local policy mak-ers), exploratory behavior (with little learning or advantage), efficiency aiming

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behavior (through information gathering and cooperation), and strategic behav-ior (looking for common innovative solutions) (Capello, 2000; Camagni, Capel-lo, 2004).A particular form of urban network is represented by what Calafati (2002, 2009)

has termed “urban coalescence”: a process by which nearby small towns, once separated, grow and merge to create an almost continuous urban fabric providing some economies of scale and allowing the development of excellence functions and an efficient division of labour among centers.

6. Competitiveness

Competitiveness has been long considered a central issue in urban development, for three main reasons.

The present exports and industrial base may be overwhelmed by changes in a. technological paradigms or in the international competitive arena, with the emergence of new manufacturing areas. Present trade conditions may help urban development in the short run, and determine important internal income multipli-ers, but in the longer perspective it is up to the city’s entrepreneurial, service and knowledge structure to continuously renovate the export base (Collidà et al., 1968).Unlike the case of countries where currency devaluation and wage-price flex-b. ibility can ensure the maintenance of some role in the international division of labour, there is no automatic rebalancing mechanism ensuring the persistence of a competitive condition for small territories and cities; these, in fact, compete with other territories on the basis of an “absolute advantage” or “competitive ad-vantage” principle, not on the basis of the more favorable Ricardian “compara-tive advantage” principle, and they are destined for crisis or “desertification” if their competitiveness vanishes (Camagni, 2002).Cities, and large and medium cities, are the gateways for the internationalization c. of the entire regional and national territory. Hence efficient cities, well integrated into the global urban network, represent an important precondition for the suc-cess of national economies (Gorla, Cheshire, 1990; Costa, Toniolo, 1992).However, as said (section 3.3), a functional analysis based on objective competi-

tive advantages does not tell the full story concerning urban development. The evolution of the terms-of-trade between the city and the rest of the economic system, or between core areas of the world and the world’s peripheries, is a crucial part of the picture. This means that not just territorial “production” capabilities, but also territorial income distribution conditions, must be inspected. And this represents, in my opinion, a large gap in the general approach of regional science. Terms-of-trade represent the exchange rate between central and peripheral labour, the way in which “control” over “manual” or dependent labour is exercised by “intellectual” labour or the ruling (urban) classes (Camagni, 1992, Introduction). Analysis of these rather new issues would require investigation of power relations in space, and

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in particular of city-countryside relationships in each development stage (Becchi, 2007). As said, the city may avoid the crisis intrinsic in its relative costs by virtue of a favorable trend in its terms-of-trade (advanced services/manufacturing industry) and its monopoly on innovation factors, knowledge and decision-making power (Aydalot, Camagni, 1986).

7. On Urban Rent

The central issue of urban land rent has not received close attention in Italy. With the exception of two seminal books by Erik Silva (1964) and Italo Magnani (1971), and of some radical reflections by leading urban planners interested more in the management of land rent its interpretation (Campos-Venuti, 1967), the field has almost never be explored. The present writer, in a chapter devoted to urban land rent in his textbook (Camagni, 1992, chapter 9) has proposed a general theoretical synthesis in which two main subjects are treated innovatively: the theorization of absolute land rent, and the profits/rent relationship.

The concept of absolute rent arises from one of Marx’s intuitions, which was not followed by a proper and acceptable theorization. It springs from some inconsisten-cies in the standard von Thünen – Alonso model and some insufficient interpreta-tions of the real world:

why should a landlord on the edge of a city lend its property for a rent equal to -zero? (this was mainly Marx’s argument);what if total demand for urban land suddenly increases? (this is Magnani’s -(1971) main concern in comparing the rates of expansion of total demand and total supply of urbanized land);what if a city is able to provide perfect and costless transport modes in all di- -rections (flying carpets?) so that each place becomes equally and perfectly ac-cessible? Differential rent should go to zero but actual rent would rise because everybody would want to live and work in such a city!Absolute rent is therefore conceived as the effect of a generalized, macro-territo-

rial “demand for city”, always compared with the scarcity of urban(-ized) land and its slow supply process and determined by the presence of generalized agglomera-tion advantages. The theoretical consequence is that it is not possible to build a complete theorization of urban rent by working on the accessibility principle alone (and differential advantage); the agglomeration principle providing an “absolute” advantage to all urban sites must be considered and added to the theoretical frame (Camagni, 1992, chapter 9).3 4

3. This proposition is shared by a promising young scholar, Micelli (2001); Silva (1964) emphasizes the effect of urban infrastructure investments as a determinant of absolute rent.4. It has been shown that this interpretation is consistent with Sraffa’s treatment of rent in his Production of commodities by means of commodities, chapter 11, where he points out two forms of agricultural rent: a differential rent (which he calls extensive), deriving from the diverse quality of lands, and an absolute one (which he calls scarcity-led) deriving from total demand for

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The relationship between profits and rents is a long-standing leitmotif in classi-cal economic thought: land rent appropriates profits in the long term, determining a generalized trend towards a general crisis. In cities, a growth in profits (as a consequence of the launching of a new wave of innovations à la Schumpeter) will soon be captured by an increase in urban land rent, giving rise to a consequent crisis (in profits, employment and urban income) until rents decrease again. This mecha-nism – which once again has to do with income distribution, this time between two types of remuneration – may be used as an interpretative tool for urban-life cycles (Camagni, 1986), and it has been modeled y a prey/predator dynamic model in which profits are the prey and rents are the predator (Camagni, 1992, section 11.4.3). The model has been successfully estimated in the case of Italian cities by Capello and Faggian (2002).

8. Conclusions and Some Questions for Future Research

As a conclusion and contribution to future work, I shall pose some questions concerning the general direction of urban economic research.

Firstly, it is clear from the preceding discussion that almost all fields in urban economics have been covered by Italian scholars closely integrated into the inter-national debate and research. As a consequence, it is possible to state that most relevant processes and facts have been interpreted, modeled, and simulated. But what about our capacity to anticipate or forecast? Unfortunately, even if nobody has accepted the nonsensical idea of the end of distance and geography, the main trends in urbanization, counter-urbanization, re-urbanization have often been discovered post festum and more often extrapolated in time as if they were structural facts with a linear development – whereas reality mainly evolves through cyclical processes. In these conditions, forecasting exercises have apparently lost their appeal, while they should represent the natural outcome of the scientific interpretation process. Conditional foresight, if not forecasting, needs diverse competences, a capacity to interpret feedback effects and bifurcations, and a dose of fantasy: in regional devel-opment studies the Milan group has taken up this challenge (Capello et al., 2008). A similar answer is crucially expected from urban scientists (including myself, of course!). How do we construe our common urban future?

Secondly, and linked to the former to the former point, is it plausible to expect some form of urban crisis similar to, and possibly consequent on, the general crisis that we are experiencing at present? To be sure, many recent manifestations of urban development in large or mega-cities of the Western world reflect a number of general trends. For example, skyrocketing land prices in the center of cities like London, New York, Tokyo, Paris, Milan have been linked with the astronomical profits (and bonuses) of the financial sector, and also to the terms-of-trade between Western labour and that of emerging countries, mainly China? To what extent will we be able to maintain our present relative wealth? For how long will large cities be

crops vs. supply, and equal on all lands.

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able to provide huge benefits to local activities, and high enough to counterbalance the huge and increasing cost of urban maintenance, control and investment?

Thirdly, given a positive, even if unlikely, answer to the previous question, is the present planning system (and more generally the present institutional urban governance setting) strong enough and properly equipped to meet the challenge of managing the physical expansion of mega-cities and city-regions? (Camagni, 2001). Whilst on the one hand the recent tradition of including private parties in urban development and planning through different forms of partnership has allowed the acquisition of private project and design capabilities in the urban planning field, on the other, has it not opened the way to the risk of greater real estate speculation, with limited or nil advantages for urban society?5 What are the correct boundaries of a fair private/public partnership?

Fourthly, in some countries, especially the UK, USA and Italy, some important commentators have pronounced in favor of a return to a market-driven approach to urban development, contrary to the self-referential culture of planners and of supporters of urban sustainable development. In many cases, a public choice and neo-Austrian scientific reference (à la von Hayek) has been advocated (for all, see Pennington, 1999, 2003; Parr, 2005; Moroni, 2007). Are we sure that a laissez-faire approach is what the city will need? (Camagni, 2008). Or is it only the territorial counterpart of perfect faith in the virtues of the pure market that was held in regard to the financial recovery of capitalism before the crisis?

These are four questions facing the corpus of urban economic knowledge accu-mulated by scholars in the last fifty years.

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Scienze Regionali Vol. 8 – n. 3, 2009, pp. 151-170 Thirty Years of Regional Science in ItalyItalian Journal of Regional Science Special Issue

Models in Understanding and Planning the City

Lidia Diappi*

(Paper first received, April 2009; in final form, July 2009)Abstract

The aim of this paper is to present a both chronological and conceptual overview of thirty years of Italian research in the branch of urban modelling within the interna-tional context. It frames the Italian contributions within international modelling devel-opments, showing the close interrelations which have been established throughout the period considered. During this brief but creative period we have witnessed substantial shifts in approaches: from a macro perspective to a micro-scale description of urban phenomena; from a static to a dynamic setting; from the role of operational tools in evaluating urban policies to theoretical investigation of urban complexity. The paper is organized around six families of models, which are characterized either by the theories underpinning them or by the formalism used.

Keywords: models, system theory, complexity

JEL Classification codes: C53, C63, O21

I modelli nell’analisi e pianificazione della città(Articolo ricevuto, aprile 2009; in forma definitiva, luglio 2009)

SommarioQuesto contributo presenta una rassegna cronologica e concettuale, dalla nascita

dell’AISRe fino ad oggi, dei modelli prodotti da ricercatori italiani appartenenti alla comunità scientifica delle Scienze Regionali. Verranno rapportati i contributi italiani all’ambito della produzione scientifica internazionale mostrandone le forti interazioni presenti lungo tutto il periodo considerato. Durante questo periodo breve ma creativo sono avvenuti cambiamenti sostanziali d’approccio al sistema urbano/territoriale: dalla scala macro alla scala micro, da un’impostazione statica ad una dinamica, da un ruolo eminentemente operativo di supporto al planning a strumento di indagine della com-plessità dei fenomeni territoriali.

Il contributo è organizzato attorno a sei famiglie di modelli raggruppate per simila-rità rispetto o alle sottostanti teorie o alle formalizzazioni assunte.

Parole chiave: modelli, teoria dei sistemi, complessità

Classificazione JEL: C53, C63, O21

* Architecture and Planning Department, Milan Polytechnic, Via Bonardi 3, 20131 Milan, Italy, e-mail: [email protected]

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1. Introduction

The aim of this paper is to present a short overview of thirty years of Italian research in the branch of urban modelling within the international context. This brief but creative period has seen substantial shifts in approaches. Indeed, even the paradigm concerning the basic mechanism of the city to be modelled and the way in which such modelling takes place has changed. Illustrated in what follows will be how urban models, which in the 1960s were originally conceived in aggre-gate terms in a static cross-section over time, have gradually moved to a dynamic setting. Their nature has changed from pragmatic operational tools with which to test large-scale public policies and investments to exploratory tools with which to investigate and test theories on complex urban phenomena.

After a period dominated by comprehensive urban models focused on the links between transportation and land use, from the mid-1980s to the end of the 1990s Italian regional science researchers made fundamental contributions to the theory and modelling of urban complexity. The past decade has been marked by increased efforts to model urban dynamics by adopting a micro viewpoint focused on the local individual behaviour of agents and their interactions. This has reflected on the one hand improvements in data processing with new technologies, and on the other, methodological capabilities acquired from the neural sciences and analogies with mental learning processes.

Approaching this complex body of knowledge requires the assumption of precise boundaries for the field, appropriate sources of analysis, and a basic, general frame-work of classification. It is first of all assumed that all the models seek both to understand the complexity of urban systems and to evaluate decision-making once alternatives have been explored.1

The time lines are based on a classification of various streams of thought which have influenced urban modelling over the past thirty years. Closer examination of the aims and features of current modelling shows that, despite the large number of studies conducted, six main approaches have been adopted and around which most modelling experiences cluster. These groups, which are characterized either by the theories underpinning them or by the formalism used, are the following:

spatial interaction models;1. dynamic logit models;2. chaos models and fractal geometry;3. ecological models;4. departmental models, which include comprehensive and hierarchical models;5. geocomputational models. 6.

1. The sources of analysis selected are: 1) The AISRe Series books collecting a selection of the Proceedings of the AISRe Conferences (1980-2008); 2) Italian and international books surveying this subject and edited by Italian researchers; 3) Journals dealing with regional science and urban modelling at national and international level (RS; Papers in Regional Science, Regional Studies, Environment and Planning A and B - Planning and Design; Computers, Environment and Urban Systems).

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For each group, further distinctions may be made in terms of operational tasks, which may be oriented to pointing out equilibrium conditions or to studying the range of far-from-equilibrium behaviours and the model’s stochastic or determin-istic form.

Also scale (micro, meso and macro) is a crucial feature of the models. It is easier to discuss this topic within each family, because the scale may change from the theoretical formulation to the resolution.

Understanding the evolution over time of modelling efforts requires investiga-tion of the aspects of major concern for city modellers and policy makers.

2. Dynamic Spatial Interaction Models

In general Spatial Interaction (SI) approach aims to model “relational” phenom-ena essentially among population activities and economic activities, starting from a “basic” criterion, the accessibility concept. It is applicable to systems of disor-ganized complexity (Weaver, 1958), characterized by a large number of elements which interact only weakly; thus statistical averaging methods can be used.

The SI approach, which was developed in its statistical form by Wilson (1967, 1970 and 1974) by means of the entropy-maximizing principle, has been extended in a dynamic context, again by Wilson (Harris, Wilson, 1978; Wilson, 1981), and then applied to the main components of urban and regional systems, such as service sectors, residential and industrial location, and land-use transportation interdependencies.

The basic principle underlying dynamic SI models à la Wilson type can be stated as follows: owing to spatial disequilibria relationships between the demand and supply of a certain good/service, spatial effects of logistic type emerge, with possi-bilities of jumps and bifurcations.

A significant application in this context has been performed by Lombardo and Rabino (1983a, 1983b, 1984 and 1986), who applied the Wilson model to the metro-politan area of Rome in order to determine the model’s capacity to reconstruct the dynamic development of a real system, as well as to evaluate its performance for different values of spatial impedance parameters. The results showed the model’s good suitability in representing diffusion and concentration phenomena in relation to scale economies and accessibility.

A stochastic version of a dynamic SI model has also been analyzed by Vorst (1985), who considered a stochastic differential equation taking account of stochas-tic factors in the growth of shopping centres. Along this research line, Nijkamp and Reggiani (1988a and 1992a) have developed a stochastic optimal control version in a migration context. They demonstrated that the inclusion of stochas-tic disturbances in the singly-constrained dynamic SI model affects the optimal trajectories by obtaining stochastic movements stemming from deterministic equa-tions. Nijkamp and Reggiani have also shown the structural stability of dynamic

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SI models emerging from optimal control formulations, meaning that the related qualitative properties are not lost when they undergo small perturbations.

It should also be noted that, from a formal point of view, dynamic SI models prove to be optimal solutions of a dynamic entropy optimal control problem. This also indicates that a dynamic entropy can be interpreted as a cumulative utility function concerned with generalized cost minimization.

To summarize, dynamic SI models are able to capture the evolutionary pattern of a dynamic SI system as well as to describe and interpret various behavioural proc-esses underlying group choices. From a formal viewpoint, many dynamic models of different types can be derived and unified within the broad framework of SI models by showing the potential of such tools. In this regard, a fundamental aspect of SI models consists in their connections with choice theory, and hence with logit models.

3. Dynamic Logit Models

The link between SI models and deterministic utility theory, as well as between SI models and random utility theory, has been pointed out in a static and dynamic context by Nijkamp and Reggiani (1988b and 1992a). This result is indeed interest-ing because it shows the connection between SI models (derived from a macro-utility approach, i.e. the entropy approach) and logit models (derived from a micro-utility approach, i.e. the random utility theory).

Logit models have been well known in the economic literature of recent decades. They belong to the broad class of discrete choice models (DCMs) which have acquired an important position in the literature on disaggregate spatial interac-tion and activity analysis. The main characteristics of DCMs are derivation from the maximization of a random utility function taking account of individual utility differences emerging from taste variations, individual measurement errors, effects of missing data, and misspecifications. Since their development in urban travel demand (Domencich, McFadden, 1975), Logit models have received a great deal of attention in the applicability of spatial choice problems (mode choice, residential choice, product choice, etc.) because of their easy computational tractability.

In Italy, a fundamental contribution to theoretical consolidation of the Logit approach in spatial economic systems has been made by Leonardi. In particular, Leonardi (1981, 1983a and 1984) demonstrated the equivalence between Logit maximization and random utility theory by analyzing the asymptotic properties of random utility functions, and hence by deriving Logit models with no assumption as to the analytical form (such as the Gumbel function) of the utility function.

The choice theoretic approach has been extended into a dynamic context by Leonardi (1983b and 1987) and Leonardi, Campisi (1981), with reference to spatial choices in mobility processes. The main idea underlying these models is the intro-duction of the dynamics of decision-maker evaluation and formation of expected utilities:

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“the attempt is to try and to model the evaluation process not as a point wise signal, just due to the current state of the system and its capacity tension, but as the outcome of the expectations the household have on the future benefits they will gain (or lose) by taking decision to move” (Leonardi, 1987; pp. 141).

The above approach, termed “time-nested random utility theory” and applied to housing mobility and residential-labour mobility, has been also formalized into an optimal control representation and extended into a stability analysis (see Leonardi, 1987).

The need to analyze (ir)regularity effects in dynamic spatial models has led – in the 1990s – to closer attention being paid to chaos theory, given its intrinsic char-acteristics of producing deterministic, erratic behaviour which is largely similar to irregular – endogenous – fluctuations observed in reality. A synthesis of chaos models with particular reference to the Italian contribution in regional science will be provided in the next section.

4. Chaos Models and Fractal Geometry

At the beginning of the 1990s, chaos theory attracted the attention of social sciences because of its capacity to capture irregular motions endogenously produced in economics and social sciences. Chaos theory was originally developed in math-ematics and physics, but it became formalized as such after the middle of the last century in meteorology and natural sciences with the pioneering work of Edward Lorenz (1963) on weather prediction. Another crucial contribution was the well-known article on logistic maps by Mitchell Feigenbaum (1978), where the author was able to show the universality of the theory and its applicability to different phenomena.

Chaotic behaviour takes place when relatively small uncertainties in a dynamic system cause unpredictable – or at least seemingly unexpected – outcomes, even if the solutions of the system concerned were originally determined. In other words, the notion of chaos refers to deterministic but hardly predictable behaviour by a system, at least for critical parameter values and initial conditions. Hence the novelty of chaos models lies in the possibility of combining a relatively simple structure (e.g. in terms of number of variables) with a potentially rich spectrum of dynamic behaviour.

Today, applications of chaos theory are largely concerned with analysis of economic spatial patterns. The main purpose of using chaos theory in the social sciences in general is to obtain better insights into the underlying causes of unfore-seeable evolutionary patterns of complex dynamic systems. Surveys of numerous applications and illustrations of chaos theory in economics and regional science can be found in the books by Nijkamp and Reggiani (1990b and 1992a).

An important result in this regard is demonstration of the link between dynamic Logit models and May’s model (see Reggiani, 1990; Nijkamp, Reggiani 1990c and 1992a). This sheds new light on dynamic logit models (and consequently on the

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equivalent SI models) by showing that it is possible to generate (macro) random-ness without any external random input (see also Sonis, 1992).

The Lorenz model can be used to show chaos in a continuous setting formal-ized in a three-dimensional system of differential equations. Caos theory has been interpreted in the context of regional employment by Dendrinos (1986) and, in the context of urban dynamics by Nijkamp and Reggiani (1990a and 1992a) and Zhang (1991), by displaying the possibility of chaos under particular values of the parameters (growth rates) and initial conditions.

In general all these “chaos” experiments lead to the same consideration: “The main conclusion for this experiment seems that in spatial models chaos is a

possibility, not so easy to reach. More attention should thus be paid not only to the theo-retical structure of chaos models, but also to empirical research testing the range of parameter values as well as the initial conditions which could lead to chaotic pattern” (Nijkamp, Reggiani, 1992a, p. 120).

A further remark concerns the close connection between chaos models and strange attractors (the attractors which encapsulate the exponential separation of orbits in chaos models) and hence between strange attractors and fractal (i.e. non-integer) dimensions. However, although chaos and fractal geometry are closely related, the two fields have not to date been incorporated into a unified theoretical framework.

From an empirical viewpoint, fractal theory has received a great deal of atten-tion especially in regard to the dynamics of urban forms (see Batty, Longley, 1986 and 1994; Longley, Batty, 1993; Frankhauser, 1994 and 2008). A significant Italian contribution to this stream of research has been made by Diappi and Bolchi (1993), who adopted an analytical and simulative approach to urban form. The process of morphogenesis can be conceived as an aggregative process driven by a combina-tion of site selection criteria and environmental opportunities and constraints.

The use of different algorithms based on random walk (Stanley, Ostrowsky, 1986) or casual throws (the Eden model) have yielded different urban patterns showing similarities with contemporary and historical town patterns. The param-eters and distribution probabilities of allocation may change in relation to the trans-port system and accessibility, urban density, natural boundaries, urban rents and diseconomies. On the other hand, fractal geometry enables the measurement and comparison of different urban aggregates through the use of fractal dimensions (Frankhauser, 2008). This approach has proved useful in comparing the land frag-mentation effect of urban sprawl at different temporal thresholds.

5. Ecologically-Based Models

A further paradigm to have received close attention in the modelling literature of the past decade concerns competition (substitution/complementarity) among popu-lations in a space-economy, which is generally formalized by means of ecologi-cally-based models.

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The potential of using the formalism of mathematical ecology in economics has been stressed by an increasing number of researchers. In particular, connections of “methodological” type have been emphasised by several authors (Camagni, 1992; Nijkamp, Reggiani 1992b; Rosser, 1991), who show that the main (non-linear) models used in economics derive essentially from two ecological models, viz. the May model and the Lotka-Volterra (or prey-predator) model (which essentially represents a system of interrelated logistics).

The unifying idea is that competition for the same resource leads to a partial (or total) substitution of the population. It should also be noted that these two prototype models can give rise to oscillating or chaotic behaviour.

The 1980s saw an increasing amount of literature on mathematical ecology applied to urban and regional economics. To be cited as regards the logistics law for dynamic growth processes are Allen et al. (1978), Wilson (1981), Pumain et al. (1989), and Camagni et al. (1986), focused on modelling urban dynamics. Notable studies using the Lotka Volterra equationshave been Dendrinos, Mullally (1981) with their analysis of urban dynamics, Dendrinos, Mullally (1985) and Dendrinos, Sonis (1986), who studied inter-urban and intra-urban evolution, Camagni (1985), Nelson, Winter (1982) and Sonis (1986) with their models of innovation-diffusion processes, Curry (1981) and Nijkamp, Reggiani (1990b) with their analysis of labour-market evolution. A stochastic formulation of Volterra-Lotka model is also analyzed by Campisi (1986).

A Volterra-Lotka economic approach has been adopted by Capello and Faggian (2002) to simulate the dynamics between urban rent and population. This study assumes a Ricardian/Schumpeterian approach to show how population and land rents are affected by cyclical dynamics displaced in phase. Low rent values attract population into the city, but this induces, through increased demand for housing, a rise in rent. The rent increase moves people away from the city and this, after a short period, gives rise to a fall in rent. Tests of the ecological model on many Italian cites using econometric techniques has shown its validity in capturing the underlying dynamics, notwithstanding the variability of local markets.

6. Compartmental Models

6.1. A Definition

A compartmental model (De Palma, Lefèvre, 1987) is concerned with a system composed of a finite number of sub-systems, called ‘compartments’, among which the system’s fundamental units move. Each compartment is assumed to be a homog-enous entity within which the entities being modelled are equivalent.

The purpose of such models is to determine the temporal evolution of the state of the system, which is described by a number of units in each compartment. Models of this type, which can be deterministic or stochastic in form, have been widely used in Markovian homogeneous processes to describe, among the other fields, cohort

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survival patterns, interregional migratory movements (Rogers, 1975, Campisi et al. 1982), and building stock decay dynamics (Buccino et al., 1980).

The main methodological innovation in the field of urban dynamics concerns the non-linear multi-state system in a stochastic form (Master equation) within the general theoretic approach of synergetics. One of the most fundamental problems in synergetics consists in deducing properties of one complex system at macro-scopic level starting from those of its elementary components. The originality of the synergetic approach lies in its intrinsic interdisciplinarity. Independently from a comparison between physical and social phenomena at microscopic level, systems may present similar features at macroscopic level. Indeed, many structural prop-erties associate the two system sets: a hierarchical structure, complex and non-linear interactions, spatio-temporal evolutions with deterministic tendencies, and stochastic perturbations.

The first organic presentation of this approach in regional science, or more precisely, in the field of quantitative sociology, has been provided by Weidlich and Haag (1983), exponents of the Hacker School of Synergetics in Stuttgart. Further developments in the direction of dynamic decision theory have been achieved by Haag (1989), while Sanders (1992) has produced a general theoretic framework of synergetics for urban analysis.

From a synergetic point of view, a socio-economic system can be conceived as a multi-component system consisting of groups of decision makers orientating their activities with respect to the environment. Consequently, aggregation can give rise to qualitatively new situations. By considering non-linearity between choice behaviours, which express the structure of self-consistence prevalent in each socio-economic system, synergetics concentrates on structural self-organizing space-time features of such multi-component systems.

In Italian regional research, compartmental models have been widely used in migration models, in innovation diffusion processes, and in comprehensive urban modelling (see subsection 6.2). Subsection 6.3 is devoted to presentation of compartmental models in urban hierarchical models.

6.2. Comprehensive Models

Comprehensive urban models (CUM) may be defined (Wilson, 1974) as models in which all the most important components of an urban system (population, hous-ing, manufacturing and service activities, and transportation) interact with specific relationships. The base assumption is that the system tends towards a status of “equilibrium”, and its structure and dynamics are expressed in cross-sectional, aggregative way.

The radical changes in urban theory that emerged in the last twenty-five years of the twentieth century started from a questioning of this basic principle. Urban studies showed that there exist growth and change, behaviour rather than struc-ture. Cities are much more involved with surprise, innovation, adaptation, and creativity.

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In Italy, the group which formulated and applied the first-generation of CUM – Lowrian-type, static and aggregate models – developed a second generation of CUM in a dynamic setting and introduced various improvements. A model of this type, which is based on spatial interaction and a Lowry-type relationship between population and jobs has been developed by Bertuglia and Leonardi with the Spatial Interaction Group of Leeds (Bertuglia et al., 1990). It focuses on synergetic effects in micro and macro relationships. Leonardi played an important role in this model-ling effort because he had made a crucial contribution to spatial interaction theory (see next section), which is integrated in this model.

New components – labour market, wages and housing price dynamics – are introduced into a framework very close to Lombardo and Rabino’s (1983b) model Some exogenous factors are assumed: the base sector, land use constraints, trans-port network. The model is able to illustrate processes such as residential mobility, housing stock dynamics, labour mobility, service location, and prices.

Different theoretical approaches and formalisms are integrated into the model: logistic growth for the size of services, whose dynamics are driven by SI attractive-ness and size limits, and compartmental models for residential mobility and labour market dynamics. Individual utility theory enables the calculation of transition rates from one state to another. Wages and prices dynamics are assumed, as in Leonardi (1987), to be slow processes driven by strong interactions with the context. Along these lines, a previous model by Mela et al. (1987) evidenced the plurality of spatial organization principia in the same metropolitan and urban structures.

The attempt to put in the model the relationship between social, scientific and technological innovation and the city emerges clearly in Bertuglia et al. (1995), Bertuglia et al. (1994), and in Bertuglia et al. (1997). The basic aim of these comprehensive modelling is the creation of practical tools for planning able to maintain the complexity of the system as a whole, to monitor its evolution, and to simulate possible scenarios. Along this line the Post Fordist Urban Simulation Model (PF-US) of Occelli and Rabino (Occelli, Rabino, 1990; Occelli, 2005) explores the dynamics of Piedmont region through a Lowry-type model enriched by local/global interdependencies and local resources consideration.

It is worthwhile to note, in Italy, the leading role of IRES (Istituto Ricerche Economico-Sociali, the research institute of the Piedmont Region based in Turin) in developing such comprehensive operational modelling tools.

6.3. Urban Hierarchical Models

Following the urban dynamic theory along the lines of Allen and Sanglier’s (1981) path-breaking methodological contribution and the subsequent application of the same approach to France (Pumain et al., 1989), SOUDY (Supply Oriented Urban DYnamic) models have captured the basic idea of an urban hierarchy driven by structural changes. Nevertheless, new economic assumptions have strengthened the model’s explanatory capacity. Instead of the demand-side approach which char-acterized the Harris, Wilson (1978) and Allen models, the SOUDY model takes a

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supply-side approach where Schumpeterian innovation is the driving force behind the urban system’s growth. The Master equation formalization enables description of the probability distribution of states of the system at macroscopic level, starting from the individual rates of change at microscopic level.

The first SOUDY model (Camagni et al., 1986) assumed a Christallerian initial state and was based on the assumption that an efficient city size range exists sepa-rately for each urban function and therefore for each rank. The simulation results showed that a general condition for the rise of an urban hierarchy seemed to be the presence of increasing returns to scale.

A second model, SOUDY 2 (Diappi et al., 1990) was constructed in order to formulate a realistic dynamic model of urban systems. Lösch’s theory of spatial activity allocation, with the superposition of different game-theoretic market area networks, provided a more general theoretical framework than Christaller’s. At the same time, given a supply-side interpretation, the model could accommodate some empirical evidence. A series of innovative features were introduced. They included the role of innovation as the driving force behind urban dynamics, the role of synergy-induced agglomeration economies as the force behind the resilience of large centres, and the possibility that activities may disappear in space-time due to local congestion diseconomies.

The SOUDY 3 (Camagni, Diappi, 1990) model maintained the general supply-side approach of the previous models and the idea of general urban development driven by Schumpeterian innovation. In these simulations on urban dynamics, changes in urban ranks and centre functions took place on the basis of innovation and synergy effects. This dynamic simulation model was able to show differentiated locational logics for tertiary and manufacturing functions by taking into account, inter alia, local intersectoral synergies.

This short survey has clearly revealed that the period from the 1980s to the mid-1990s, was the most fruitful for modelling in RS. The strong interest in large-scale relevant phenomena of urban dynamics, the investigation in theories through models, and the attempts to introduce into RS a conceptual framework and tools adopted from the emerging science of complexity, produced an original body of knowledge which is now internationally well known .

7. Toward Micro Dynamics: Geocomputational Models

7.1. Geocomputation: a Definition

At the beginning of the 2000s, the focus on urban modelling began to move from a macro to a micro perspective owing to the appearance of new GIS, new compu-tational capabilities, and new bottom-up epistemological approaches (Openshaw, Abrahart, 2000; Batty, 2005; Diappi, 2004). Increasing interest in new data-mining techniques based on a statistical or probabilistic approach began to appear in regional studies. Among the analytical models able to uncover connections among

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variables, especial mention should be made of the study applying the Bayesian network to analysis of the differences between Genoa and Nice (Fusco, 2005).

This epistemological novelty is usually denoted with the term ’geocomputation’ (GC), an emerging paradigm with the potential to bring dramatic improvements in the effectiveness of urban studies through the use of computational intelligence technologies. For Stan Openshaw, who coined the neologism, GC is “an approach based on high performance computing to solve currently unsolvable or even unknown problems”.

Geocomputing includes approaches to human reasoning that seek to make use of the human tolerance of incompleteness, uncertainty, imprecision and fuzziness in decision-making processes. The development of distributed artificial intelligence principles and techniques (Rumelhart et al., 1986; McClelland et al., 1995) and new technological platforms, neural networks (NN), multi-agent systems (MA) and evolutionary algorithms (EA), in particular, have allowed the knowledge level to be increased by multiplying the information capacity of the GIS and offering a new approach to territorial modelling.

Many innovative features characterize this approach:the first major difference concerns the scale of description, i.e. the system’s level -of resolution. The micro-scale description which characterises the GC approach, with agents representing individual decision units, is suitable for articulating micro-spatial, socio-economic assumptions and other well-formed behavioural theories of urban processes, including land-use change. This is because many GC tools use parallel distributed computing, which is particularly suited to de-scribing interactions among subjects. This permits the generation of a new, so-cially-based type of knowledge which can greatly enhance the effectiveness of analysis, simulation and planning;the wider context for both cellular automata and multi-agent systems clearly -reflects a new concept in system theory – complexity theory – which has shifted the long-standing concern with the city as a system, and with its structure, to its behaviour;finally, GC offers opportunities to reconstruct missing information because it is -based on “substituting a vast amount of computation as a substitute for missing knowledge or theory and even to augment intelligence” (Openshaw, Abrahart, 2000). Geocomputation is something more than a set of methods and techniques for

sophisticated data processing. It is, to some extent, an approach to understanding phenomena different from the traditional model-building approach.

7.2. The Spatial Investigation Capabilities of Neural Networks

The most prominent feature of NNs is their ability to learn from examples. Using so-called learning algorithms, they solve problems by processing a set of training data. Some types of neural networks are comparable to statistical regression or discriminant models. However, they do not explicitly make assumptions on the

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distribution of their training data, or on the relationship between their input and output variables. Another basic question concerns the stored knowledge that gives rise to a specified pattern of activation.

From a statistical point of view, neural networks are non-parametric models, and for some of them it can be shown that they are universal function approxima-tors. There is a drawback to NNs, however, which can pose a problem for some applications: in general, it cannot be proved that a NN works as expected. Owing to its distributed nature, the solution that a NN has learned cannot be expressed explicitly. A neural network learns, but a user cannot learn from the network. For the user it is simply a black box.

Griguolo (2004) has shown the power of neural networks as pattern recognisers (see also Griguolo et al., 1997). He has developed a method of land cover recogni-tion that operates via a supervised neural network and uses the available ancillary information during the assignment process itself and not as a separate step. The approach is operational and is illustrated by means of an application described in detail.

Diappi, Buscema and Ottanà (2004) have addressed the problem of classifying Italian cities with respect to sustainability by analysing positive and negative exter-nalities arising from interactions between social, economic and environment urban system indicators in each city.

The use of NN as multidimensional classification tools, often based on SOM (self organizing map, Kohonen, 1995) algorithms, has been successfully adopted by various studies: in classification of the competitive advantages of Italian prov-inces (Virgilio, Lonardoni, 2004); in producing an original mapping of productive agglomerations in Italy which goes beyond the notion of specialization and is based on the concept of multi-dimensional similarity in the distribution of resources (Carlei et al., 2008); and in analysing sustainability on a neighbourhood scale (Diappi et al., 1999). A highly innovative and useful application of back propagation NN concerns the strategic evaluation of programmes and plans for urban regeneration (Virgilio, Pifferi 2006): NN processing was able to determine the most important characteristics of successful plans and to apply the rules learned to identify the best plan among different alternatives.

The learning capabilities of NN coupled with the spatial logic of CA have led to the implementation of a dynamic spatial model of sprawl (Diappi, Bolchi, 2004), the purpose being to build a possible land-use scenario in the Southern metropoli-tan area of Milan. The model adopts the transition rules learned from a SOM neural network which processes land-use changes occurring in the area being studied over two decades. A stochastic model then allocates the land-use changes in the subse-quent period (forecast).

The increasing body of analytical studies based on neural networks thus demon-strates the usefulness of these tools in investigating the complexity of spatial systems and their dynamics.

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7.3. Multi-agent Systems: Interactions among Actors and Their Behaviours

Simulating real processes using multi-agent systems (MAS) means building up a complex system from individual decision units with a certain degree of autonomy and which interact with each another according to certain rules. This system can be defined as “… a weakly connected network of agents which act together to resolve problems that exceed their individual capacity to resolve them…” (Durfee et al., 1989; Ferber, 1995). Originally developed to solve problems in information science, the approach is now widely used in economics to evaluate the problems of competition or cooperation in markets, in ecology to study the evolutionary dynamics of species, and in urban studies to evaluate such matters as competition between cities (Portugali, Benenson, 1997) or the various demographic weights of cities in a region, starting from the behaviour of individual household (Aschan et al., 2000). Transport and mobility, as in the study by Nagel and Raney, are issues particularly suited for MAS treatment because they simulate different settlement behaviours and the reciprocal effects of individual journeys on infrastructure. The way in which multi-agent systems are structured demonstrates the power of the approach: it builds a model starting at the level of a single agent relative to other agents, and can then allow cooperation, negotiation and competition processes to develop, thus forming a model of the system at a more aggregated level. An inter-esting survey on MAS applications in urban studies is published in the book of Rabino (2005).

Diappi and Bolchi (2008) and Diappi (2009) have constructed a cellular automata and MAS model on gentrification and housing market dynamics based on Smith’s rent gap theory (Smith, 1979). Smith’s supply-side approach explains the emer-gence of gentrifying neighbourhoods on the basis of investments in “large scale renewal projects” which only investors or developers looking for profits are able to carry out. They invest in degraded areas on the basis of the gap between the actual rent and the potential rent after rehabilitation (Rent Gap). Thereafter the process is sustained by imitative cooperative behaviour by property owners who gain advan-tage in investing in their properties as the quality of the nearby buildings, and their rents, increases.

A set of behavioural rules for each agent involved (homeowner, landlord, tenant and developer, and the passive agent “property unit”) has been formalized in the model and implemented on a Netlogo platform. The model was able to show the effects of several large-scale urban renewal projects on local rents and on the over-all urban real estate market.

Another interesting MAS model, the SimAC model, developed by Occelli and Bellomo (2004), simulates accessibility, home/work commuting, adoption of tele-working within a metropolitan area by assuming a structural and cognitive approach. The structure comprises social, functional and physical relationships with the urban functions as envisaged by classic comprehensive models; cognition is based on information exchange with other agents and the environment which may influence either the transport choice or the adoption of tele-working.

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It is important to note that, with this kind of modelling, agents are no longer passive entities which behave according to theoretical assumptions or statistical regularities; rather, they become active agents able to orient their choices in space on the basis of dynamic cumulative learning capabilities.

Even if MAS is still confined to experimental attempts with limited outcomes on practical planning decisions, they represent the most interesting advance in under-standing and modelling the city.

8. Concluding Remarks

Retrospectively, the main developments in modelling achieved in this period appear to be multi-faceted, as witnessed by new directions in macro-spatial systems (e.g. spatial interaction models, entropy theory), micro behavioural analysis (multi-agent systems, cellular automata), evolutionary models of spatial systems (non-linear dynamic models), and statistical data analysis (GIS, neural networks).

This overview has shown the extent to which the perspective in modelling has changed. The traditional aggregate comprehensive models which gave origin to the field have been slowly pushed out of practice in Italy – unlike in other countries, where these models continue to be applied as predictive simulations in order to provide the public authorities with complex information about possible territorial evolutions (Putman, 1991; Echenique et al, 1990; Wegener, 2004).

Decision-makers have opted for well-established sectoral models, such as transportation models (with more sophisticated discrete-choice formulations built around four-stage models) or the environmental models of pollution diffusion or risk evaluation. For their part, modellers have directed their efforts to theory and new epistemological approaches or to developing modelling as a communication practice.

The change in perspective has significantly influenced the role of modelling. Simulation itself is no longer only a matter of predicting the right future; it is also about predicting many futures, because this is consistent with awareness of the intrinsically complex and inherently unpredictable nature of cities. The role of models is thus to produce informed speculations about many possible futures and to corroborate theories and hypothesis through experiments.

Today, most modelling efforts are focused on new issues pertaining to the general problems of global warming and sustainability which require modelling capabili-ties to test policies. As the foregoing discussion has shown, models are increasingly able to tackle the complex interactions between the micro and macro scales; and this is an approach which is necessary in order to guide sustainability policies. To an increasing extent, large-scale configuration result from a myriad of individual choices and behaviours. This macro-micro interaction can be illustrated with two examples concerning energy and urban revitalisation.

The achievement of goals such as energy saving and the development of renew-able resources depends largely on individual choices by firms and households, and

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on policies at local level. This reverses the traditional view, which considers energy to be a question for national, large-scale policy.

Another relevant example is provided by the extensive process of the replace-ment and renovation of buildings and land use change that many cities in Europe are now undergoing. This process may have unexpected repercussions on rent values because the real estate market is affected by imitative cooperative behav-iours among householders, tenants and investors which may lead to gentrification or, on the contrary, neighbourhood decay and social segregation.

Against a background in which policies are shifting from a top-down to a bottom-up approach, and in which individual choices are well established, model-ling simulations acquire a key role in evaluating policies.

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Reggiani A. (1990), Spatial Interaction Models: New Directions, Ph. D. Dissertation. Amsterdam: Department of Economics, Free University.

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Scienze Regionali Vol. 8 – n. 3, 2009, pp. 171-198 Thirty Years of Regional Science in ItalyItalian Journal of Regional Science Special Issue

Regional Economic Planning

Aurelio Bruzzo* (Paper first received, March 2009; in final form, September 2009)

AbstractThe paper covers the scientific debate among Italian regionalists since the mid-1970s

on Regional Economic Planning, understood as socio-economic planning carried out by regional administrations and expressed in the drafting of regional development pro-grammes. The somewhat critical survey locates contributions by Italian scholars within a broader debate simultaneously ongoing at international level, the purpose being to advance the discipline both theoretically-methodologically and in its concrete implementation.

The conclusion reached is that Italian regionalists have made a major contribution to the international scientific debate especially when they have induced (at high government level and in a decidedly wider territorial context) a limited number of regions to adopt the strategic planning model hitherto applied to urban and metropolitan areas in both Italy and abroad.

Keywords: planning policy and models; regional socio-economic development policy

JEL Classification: O21; R58

Programmazione economica regionale(Articolo ricevuto, marzo 2009; in forma definitiva, settembre 2009)

SommarioViene qui condotta una rassegna del dibattito scientifico sviluppato dai regionalisti

italiani, in un periodo che va dalla metà degli anni’70 fino ad oggi, in materia di Regio-nal Economic Planning, qui intesa nell’accezione di attività di programmazione socio-economica svolta dalle Amministrazioni regionali, la quale si estrinseca nell’elaborazione di Programmi regionali di sviluppo. Con tale indagine s’intende verificare il contributo recato dagli studiosi italiani al dibattito contestualmente condotto a livello internazionale ai fini di un avanzamento di tale disciplina sia sul piano teorico-metodologico che su quello della sua concreta implementazione.

La conclusione raggiunta è che i regionalisti italiani hanno favorito l’adozione della pianificazione strategica ad un livello di governo più elevato e in un contesto territoriale più ampio, come quello delle Regioni, quando tale modello in precedenza era stato appli-cato, sia in Italia che all’estero, solo a livello di aree urbane e metropolitane.

Parole chiave: politica e modelli di programmazione; politica di sviluppo socio-economico regionale

Classificazione JEL: O21; R58

* Department of Economics Institutions and Territory, University of Ferrara, Via Voltapaletto 11, 44100 Ferrara, Italy, e-mail: [email protected].

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1. IntroductionThe main aim of this paper is to conduct critical analysis of studies by Italian

regionalists on the theoretical and methodological evolution of Regional Economic Planning (REP), and on its concrete implementation by the competent public authorities, in light of the international literature on the subject.

It will be assumed that the contents of the majority of studies by foreign scholars are already known. The intention will instead be to furnish a systematic account of the large body of Italian scientific literature produced in the thirty years between the mid-1970s and the second half of the current decade.

It should be immediately pointed out with regard to the discipline analysed that this paper is deliberately restrictive in its scope. It circumscribes the area of inquiry; for otherwise it would be so extensive as to touch on the controversial question of whether public intervention in the economy is indeed economically convenient at all.1

Among the various definitions of planning that have been formulated, consid-ered here is “system planning”, otherwise termed “structural macroeconomic plan-ning” because it encompasses the entire economic system on which a particular public operator – in this case the regional administration – acts by setting objectives for its overall functioning (Forte, 1970). In other words, the reference will be to socio-economic planning undertaken at a regional administrative level by devising regional development plans (Programmi Regionali di Sviluppo, PRP) or similar planning documents.

By narrowing its scope of inquiry, this paper will necessarily exclude from consideration the following, other forms of regional planning:

planning within the EU policy for economic and social cohesion. Although this -is a form of planning similar in content to the one considered here, it is excluded for two reasons: EU planning is partial because it concerns only development plans eligible for EU funding; secondly, it is “other-directed” planning, in the sense that regional administrations cannot elaborate plans with methodological autonomy; rather, they must comply with rules laid down by the European Com-mission for every multi-year planning period;sectoral planning. This is excluded for the simple reason that it is concerned with -an area of the regional system even more partial than the previous one and is often not coordinated with the other, analogous forms of sectoral planning; financial (or budgetary planning). This is excluded because it performs a role -evidently instrumental to socio-economic (or real) planning;

1. To be noted is the relationship, also at regional level, between planning activity and economic policy: planning, in fact, should be understood as an economic policy method in the sense that, in a mixed economy, the former is the specific activity undertaken by the public administration in order to make the economic institutions function effectively and efficiently. Moreover, it is distinct from the complex of economic policy interventions, even if it concerns all of them at every institutional level of government (Donnini, 1983).

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urban and land planning. This last form of planning is excluded because it main- -ly concerns land management, and is therefore different in disciplinary terms.Despite this restriction of the field of inquiry, some account must necessarily be

taken of the close interconnections (in practice) between these latter types of plan-ning and the one considered here, as testified by the repeated attempts to achieve an “integrated” type of planning.

Also excluded from the analysis is regional planning understood as the merely regional articulation of national planning. This is mainly for the reason that, currently in Italy, there is no concrete system with features similar to those of regional planning.2

Whilst trying to restrict the area of inquiry to a single definition REP, for the purposes of the following analysis it may be necessary to divide it into two sub-definitions, between which there exists a close instrumental relationship such that both will tend to emerge in the following sections:

the first is the model considered prevalent: that is, the planning of the entire -socio-economic system administered by the Region, including the public sector as a whole as well as the private sector, in compliance inter alia with a principle enshrined in the Italian Constitution;3 the second is planning by the regional administration alone in fulfilment of its -numerous and diverse responsibilities.4

2. Placing Regional Planning within the International Economic Literature

It is evident that international debate on REP has been practically non-existent for some decades, except for a recent slight revival. In fact, some of the most recent surveys on the evolution of regional science5 confirm the fear expressed by schol-ars for a number of years, and in particular by G. Bianchi (Bianchi, 1992), that

2. The only economic planning schemes conducted at national level have been the 1966-1970 Plan (better known as the Vanoni Plan) and the Progetto ‘80. The latter, in fact, was a preparatory study, not an outright planning document. Thereafter the only national economic planning has been represented by the Economical-Financial Planning Document, whose contents are conside-rably more circumscribed than those of the PRP considered here. 3. The third paragraph of article 41 states that legislation should determine the programmes and appropriate controls so that economic activity in the public and private sectors can be directed to social ends.4. With regard to competences, regional planning assumes a specific function of organising structures and interventions by the public administration operating at regional level combined with the formation and implementation of regional policies. Therefore it is not identified with regional policies but is limited, correctly, to being instrumental to them (Mossetto, 1980, pp. 16).5. See Florax, Plane (2004) and Duque et al., (2005). The latter study seeks specifically to measure the contribution made by Italian researchers through publication of their articles in the nine of the most important international journals.

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economic regional planning is no longer, or is not considered to be one of the topics of regional research, even though “policy analysis” is one of the three classic objec-tives of what is termed “econometric analysis”.

Moreover, the small number and the reduced importance of studies on the subject in recent decades suggest that it can be placed in the residual category of “other topics”.6

This is in clear contrast with one of the key assumptions of regional economic science, namely that one of the characteristics of such a science is its pragma-tism, in that it endeavours to resolve the so-called “regional problem”, meaning the existence of large and persistent interregional imbalances, whose remedying should be undertaken by the public institutions through specific economic plan-ning (and through land planning) on a regional level.7 It is also in contrast with the empirical evidence that the imbalances recently recorded at various territorial levels (from the single city to continental areas) and in many areas of the world have not disappeared at all (as some had optimistically presumed) but rather have recently exacerbated.

Unfortunately, large part of Italian regionalists have followed this tendency, except for (i) those who have sought to advance the traditional approach developed in the two decades before the institution of the ordinary statute regions; (ii) those who have sought to highlight the theoretical reasons for the continuing need for public intervention in the economic system via development policies and land plan-ning. To be emphasised in this regard is, firstly, the transformation of the original general theoretical framework of “static optimization” into one of “dynamic opti-mization”, wherein the conditions must be defined to favour territorial changes and thus enable the more rapid reallocation of resources from sectors in decline to those in growth; secondly, the explosion of globalization, that is, the context of complete openness and interdependence that has pushed space and territorial conditions into the foreground as factors in the increasing importance of local conditions for economic success (Camagni, 2001, pp. 178-179).

Finally, after years in which the predominant attitude in regard to territorial development policies, among both scholars and international institutions, has been to call for policies more oriented to the market and laissez-faire positions, recently apparent are signs of renewed interest in planning both in Italy and internationally:

6. Among the perplexities expressed, in particular by R. Capello and E. Cicciotti, concerning the evaluation of Italian research in the regional sciences expressed by the second of the surveys cited at note 5, there is in particular the consideration that there is no reference to regional and urban policy. This suggests that also these themes are included under the heading “growth and economic development.” All of this, however, must be interpreted as a widespread lack of inte-rest in these topics in recent decades among foreign scholars.7. See e.g. D. E. Boyce, who many years ago argued that: “…we sometimes hear that regio-nal science is not interested in planning. However, I would suggest that this is incorrect for the following reason. Regional science is concerned with the phenomena of urbanization and regional development. Taken in their entirety, these processes clearly include the institutions and activities called planning” (Boyce, 1975, pp. 188).

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more precisely, in Italy, in the only true experience of economic planning at national level (Cristiano, 2006), and early initiatives in regional planning (Pizzanelli, 2000),8 and internationally, in empirical and applied aspects of regional science to which the Regional Science Association International (R.S.A.I.) devotes a specific journal.9

3. The Periodization of the Analysis and Connected Problems

From a methodological point of view, the following historical reconstruction of the positions taken up by Italian regionalists on REP will be conducted as follows:

according to an interdisciplinary approach consistent with the nature of the sub-a. ject of inquiry, although for obvious reasons the emphasis will be on economic aspects; according to a chronological criterion, in order to clarify the evolution of the b. debate on the items deemed most important from time to time in this long period.In fact, as stated in the introduction, the reference period spans from the second half of the 1970s to the second half of this decade, which only in part coincides with the thirty-year activity of the AISRe.10

On the basis of the topics addressed by contributions surveyed, this period can be divided into the following four sub-periods, of differing duration and importance:

the second half of the 1970s and the 1980s; -the first half of the 1990s; -the second half of the 1990s until the first half of the current decade; -the second half of this decade until the present. -Obviously, like all periodizations, also this one is questionable, mainly because it

is not always possible to distinguish one sub-period sharply from another. However, for the purposes of this paper, it would be inconvenient to adopt a different time frame, such as, for example, that established by planning relative to EU cohesion policies. This consideration is not based solely on the exclusion of this type of plan-ning from the present analysis but also, and especially, because it would be a perio-

8. See, respectively, Cristiano (2006) and Pizzanelli (2008).9. The reference is to the journal entitled Regional Science Policy & Practice, the first issue of which was published at the beginning of 2009, and in which such classic topics as the trade-off between national growth and territorial equity, and regional convergences in the EU, are addressed.10. The starting point of the mid-1970s does not signify that the topic of economic planning (regional included) was not addressed previously to that date. On the contrary, in the 1960s many important scholars (economists and others), such as (in alphabetical order) M. Allione, M. Arcelli, V. Del Punta, F. Di Fenizio, G. Fuà, F. Indovina, S. Lombardini, G. Mazzocchi, F. Momigliano, S. Ricossa, P. Sylos Labini, M. Talamona, dealt with it from many points of view. In particular, they sought to determine the significance and limitations of regional planning, to establish its relationships with national planning, to study the problems of method and theory raised by regional plans, to identify the most effective instruments, and to verify their results.

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dization in many cases in contrast with the pattern emerging from examination of the topics addressed by Italian scholars.

Finally to be pointed out is that an attempt will be made to grasp the principal features of the studies deemed most important in each of the four sub-periods, together with their evaluation, while highlighting issues that appear to be still unresolved.

4. The First Sub-Period: from the Second Half of the 1970s to the End of the 1980s

4.1. Main Contents

The main features distinctive of this first and long sub-period can be identified in (i) the start-up of regional planning activity by ordinary statute regions, which came about on the basis of principles introduced in their statutes and then pursuant to law no. 335/1976 (i.e. the framework law on regional accounting) and the well-known Decree by the President of the Republic no. 616/1977, which completed the devolution of powers to the newly-instituted ordinary regions; and (ii) the gradual modification made to the contents of the first PRPs, also because of their demon-strable limited efficacy in most cases.

From the point of view of scientific studies on regional planning, the sub-period is characterized by the presence of various strands of thematic analysis.

The first theme, both chronologically and in terms of importance, was initi-ated by a study which sought to frame regional planning within a both theoretical and operational context (Gasparini, 1975). After recalling the main referents then available in economic theory (such as J. Tinbergen’s work on the decentralization of economic policies and R. Frisch’s “channels” model), Gasparini identified the reasons why regional planning should flank national planning: namely, the pres-ence of socio-economic disparities among regions, and the possibility of giving better definition to the objectives assumed by national planning.

For their part, the regions (understood as enterprises operating in a non-compet-itive market) should undertake their planning activities by incorporating structural components into them, such as (i) the macro-economic framework, whose construc-tion requires a model (albeit not a particularly refined one); and (ii) projects devised by structures within the regions themselves. Finally emphasised was the close rela-tionship between economic planning and territorial planning, given that “the spatial order” assumes particular importance in regional planning.

Other studies in this strand sought to configure the role attributable to the regions (and to decentralized public administrations) within planning and economic policy (Mazzocchi, 1978; Formica, 1980). Whilst the former author suggested, using a more conventional approach, that regional (and local) governments should under-take the important tasks of allocation or the optimal use of resources among sectors or zones within their territories, the latter, although claiming that decentralized

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institutions are the main instruments with which to exercise public control over resources on the demand side, in order to ensure their better use, nevertheless argued that decentralized institutions could not be expected to perform the govern-ment’s tasks in the economic field, instead confining them within the narrow and often impracticable area of indirect executive action, which should be part of policy for demand management. Because regional problems extend well beyond imbal-ances or disparities due to remediable defects in the market system to encompass the accumulation and allocation of resources, Formica suggested, on the basis of a heterodox approach and a prospective standpoint, that the regional system should be given responsibility for supply-side policy: that is, the set of strategic interven-tions in the accumulation and allocation of resources, when the latter are still to be produced and managed.

A second strand of analysis instead dealt with the relationship between regional planning and the analogous activity undertaken by two other levels of government: those subordinate to the regions and consisting of numerous local government bodies (from provinces to mountain communities, etc), and the level superior even to the national state, namely the European Community.

Of particular importance in regard to sub-regional planning is the book published at the beginning of the 1980s in a series issued by Istituto di Analisi dei Sistemi ed Informatica (IASI) of the Consiglio Nazionale delle Ricerche (CNR), which, besides systematically dealing with possible points of interest, including methodo-logical and problematic ones, correctly framed the topic by starting from regional planning (Bielli, La Bella,1982).

More or less at the same time, the Istituto di Studi sulla Programmazione Economica (ISPE) conducted a survey on the characteristic profiles of planning documents adopted by the Regions, with the explicit purpose of determining the significance and impact of such schemes, their common features, and problems. It also considered the relationship between regional and local government, highlight-ing the replacement of the classic model, represented by an array of “top-down” plans, each conforming with the superordinate one, with the devising of horizontal linkages among the regional government, local authorities, and functional agen-cies, so as to involve all these institutional bodies in the definition of shared plan-ning commitments (D’Aniello, 1988).

Two books published in the first half of the 1980s dealt with relationships between regional planning and that by the EU, which was therefore well before the European Community reformed the structural funds with which European regional policy had evolved from being merely corrective for the redistribution of resources into a general policy with a territorial dimension (Ferrelli, 1981 and Bruzzo, 1983).

Ferrelli’s book identified features common to various experiences of regional planning: reference to the territory as an active element to be constantly taken into account; attention paid to participation, considered to be an authentically distinct feature compared with every previous form of state planning; and “the fluency of plans” as envisaged by the law on regional accounting in force at that time. All

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these were identified as valid bases on which to verify those characterizing the logical scheme of European planning.

The third strand of analysis was broader in that it was concerned with evaluation, in part critical, of the diverse planning schemes undertaken by the first regional legislatures. A first book reconstructed in detail the evolution of “first-generation” regional planning (corresponding to the regionalization of the Vanoni Plan between the 1950s and the mid-1960s) until its fourth generation, which was instead distin-guished by planning with partial objectives (undertaken from the second half of the 1970s to the beginning of the 1980s (Greco, 1983). Also highlighted was the “stickiness” that prevented a true process of polycentric planning from beginning.

Certainly the most significant studies of this sub-period were those produced by G. Bianchi in the space of around a decade,11 In fact, Bianchi did not restrict his treatment to reconstructing the evolution of the contents of regional development plans, showing their similarities and differences; he also sought to interpret such differentiations in terms of structural features (economic-territorial structure) and cultural ones (social stratification, political relationships etc), using a classification of levels based on a series of parameters (whether plans originated internally or externally to the regional environment, etc).

Then, towards the end of this sub-period, Bianchi identified around ten elements constituting the planning procedure12 (and therefore also a styled scheme of a plan’s necessary contents). He thus conducted an overall evaluation according to which the presence of substantial planning elements and the absence of at least some formal elements should be connected with a feature present, to various extents, in all real regional plans: namely that they have been devised and produced more as a political-cultural message directed to regional society than as a system of technical commands for the region’s bureaucratic apparatus (Bianchi, 1987, pp. 4).

Another valuable contribution to be mentioned was made by two non-econo-mists, although it was published only at the end of the first regional legislature. This put forward a theoretical interpretation which clearly anticipated themes that would be subsequently addressed by other scholars (Crocioni, Fantuzzi, 1976).

By way of extreme summary, these authors first showed that regional planning in Italy had begun amid the profound structural crisis of the 1970s, which fostered, on the one hand, the decline of planning understood as a science and a technique, and on the other, the advent of planning regarded as a new form of governance, that is, as a more systematic and responsibilized political method. It is of particular interest that, in face of the demise of “econometric” planning during the 1960s and, more in general, of planning regarded as a predominantly quantitative phenomenon, concrete experience, particularly in Emilia-Romagna, generated the concept of “strategic planning”. By this expression is meant a predominantly qualitative type of planning interpreted mainly in terms of devising the initiatives, programmes,

11. See Bianchi (1979), Bianchi et al., (1980), Bianchi (1982 and 1987).12. Ranging from analysis of the regional system to mechanisms controlling real processes and the effects induced, and methods for the revision of the plan.

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political actions and interventions necessary to obtain control over the changes desired in regard to an area’s social, territorial and economic processes.

Moreover, drawn from the debate at the time on planning policies was develop-ment of the concept of “continuous planning”, i.e. the elaboration of a strategic sequence of initiatives aimed at transforming the object of the plan with the neces-sary degrees of freedom (and indeterminacy) required by incomplete knowledge of the phenomena of social reactivity deriving from the plan process implemented.

From the methodological point of view, it was emphasised that a repetitive and “interwoven” procedure, in which various phases influenced each other and were adjusted by the reactivity of the actors involved in the planning, was the only way in which the planning process could be made systematically receptive to the needs of the social and economic fabric on which the same plan intended to intervene. Finally, after reaffirming the global nature of regional planning, in that it is able to make continuous operational projections ensuring control over and compliance with general objectives, Crocioni and Fantuzzi also dealt with “plan-ning by projects”. Whilst on the one hand they considered this type of planning to be a “technocratic and corporate degeneration” of plan policy, on the other, they acknowledged that it reflected a profound need to make the planning process really efficient and effective.

In conclusion, the latter was described not as a mechanism for the formaliza-tion and precise quantification of the objectives and interventions, but rather as a mechanism to accelerate or decelerate processes deemed structural, as well as to correct and qualitatively adjust the progress and the tendencies manifested by the system administered. As such it can be described as a strategic type of planning.

The last strand of analysis consisted of a single book in two volumes which can be considered a first fundamental contribution with an “educational” purpose, in that it was addressed both to university students and the new managerial class (administrators and officials) working at regional level (Archibugi, 1980).

In fact, this book consisted largely of a manual which drew on a large body of interdisciplinary literature, both Italian and international,13 which dealt not only with economic planning but also the process and method of planning the principal activities undertaken by the decentralized public administrations.

4.2. General Evaluation

In this first period one can already identify studies with evident international connections in that they drew, from the more extensive literature then being produced in the English-speaking countries (primarily North American), directions deemed methodologically valid and simultaneously applicable to the specific insti-tutional and operational context of countries with market economies like Italy.

Moreover, these studies examined the experiences of foreign countries, above all the English-speaking ones, deemed particularly significant, and also with the

13. References to foreign scholars ranged among W. Alonso, L.H. Klaassen, A. Faludi, J.H.P. Paelink, J. McLoughlin, and others.

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purpose of drawing important lessons for Italy.14 However, major differences should be stressed, most notably ones of an institutional nature. In fact, whilst strategic planning in England from the post-war period onwards was due to pioneering work by administrative bodies like the Department of the Environment, in Italy, real planning was undertaken by institutions like the Regions, which were highly diver-sified because they had political-administrative competences in different sectors of intervention and based their policies on democratic representation.

5. The Second Sub-Period: the First Half of the 1990s

5.1. Main Contents

Despite its relative brevity, this sub-period saw a rather intense production of studies on regional planning, in favour of which (after the few successes and the numerous failures of the previous decade) the search began for solutions to relaunch the discipline operationally .

A first contribution consisted in resuming the principal reasons why a Region should draw up a plan: it should fulfil the function of serving as an referent for the action of private economic actors; it should focus and steer public interventions, especially in still backward regions (such as those of Southern Italy); and it should act as the natural channel for transmission to the economic-productive and social system of the set of expectations and ambitions that the local community usually harbours in regard to its future (Camagni, 1991). These reasons were based on the following elements that would come to characterize the scenario of the next ten to fifteen years: (i) creation of the single European market; (ii) enlargement of the European Community to the countries of Central-Eastern Europe, and (iii) full realization of the information technology paradigm which for some time had characterized that period.

The second issue raised by various scholars concerned the ways in which, during that period, at the two extremes of Italy, from Piedmont to Sicily, attempts were made to relaunch planning at both regional and sub-regional level. In particular, G. Bianchi admitted that regional planning in Italy had to date been scant and above all weak and emphasised the increasing need for planning to govern a complex and territorially highly diversified society. Having detected signs of a political will to resume the option of the plan – although it was once again jeopardised by a lack of suitable instruments for the devising and implementing of plans into actions – Bianchi argued that it was time to move forward from “diagnosis” of the causes of the frequent failures of regional planning to formulation of a viable “therapy” which would enable the Italian Regions to grasp the opportunities offered by the new European Community regional policy (Bianchi, 1991 and Bianchi, Hoffmann,

14. See e.g. contributions in various books published at the end of the 1970s and in the early 1980s, such as, Giunta Regionale Toscana, British Council, IRPET, University of Florence (1979), Anderson et al. (1980) and CeSPE-CRS (1980).

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1992) consisting, on the one hand, in the Integrated Mediterranean Programmes, with which the European Community began to subject member states to more rigid rules on the use of the EC funds allocated to them, and, on the other, in the new EC regional policies based on principles introduced with the 1988 Regulations, among them that of multi-year planning.

Some years later this endeavour was joined by F. Archibugi, who sought to iden-tify the conditions for, and requirements of, more effective regional planning, in particular by examining the means/ends relationship, planning procedure as guar-anteeing the efficiency of the decision-making process, and finally the operational scheme for the planning procedure (Archibugi, 1994a).

At the same time, however, Archibugi also sought to develop (using an approach that he termed “trans-disciplinary” and enriched with a vast bibliography) an entirely new discipline of planning. This was called “planology”, and it was mainly characterized by an attempt to integrate the principal types of planning (ranging from physical, macro and micro-economic to operational, from socio-economic to territorial and environmental, to institutional), as well as by the fact that it did not specifically refer to the Region but on the contrary was intended to be applica-ble at any level of government or to any component of the public administration (Archibugi, 1991, 1992 and 1994b).

Unlike large part of the studies cited, another small, but at the same time impor-tant, body of analysis reported not a failure, but on the contrary a success in regional planning obtained by the regional government of Tuscany in an attempt to relaunch the activity. This occurred at the beginning of the sub-period and was distinguished by its adoption of an approach not only entirely consistent with the law then in force on planning procedure (at community, national and regional level), but also, and especially, with the one previously envisaged by both Italian scholars (like G. Ruffolo and P. Saraceno) and foreign ones (like R. Barras, A. Broadbent and R.H. William) and apparently inspired to some extent by English Structure Planning.

More specifically, the studies in question15 argued that the Tuscan planning model had been trialled and implemented not only with positive results but also to largely complete extent, that is, involving the various levels of government, from European to local, also by virtue of the technical-cultural support furnished by the European Community offices.

5.2. General Evaluation

In this sub-period there seems to emerge a substantial divergence between stud-ies which (also on the bases of some concrete positive results) advocated regional planning of largely global type and working at a “mesoeconomic”16 level, and other studies which – in order to increase effectiveness by further refining the planning instruments available to regional administrations – sought in a certain sense to

15. See Pieracci, 1993; Bianchi et al., 1995 and Pieracci, Baldi, 1995 and 1996.16. This term refers to an intermediate territorial level between national and local, like the regio-nal level in Italy comprising regions as political-administrative units.

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scale the planning model down, so that it would be restricted to a set of more or less organic and coordinated projects, or even to shift regional planning to a “microeco-nomic”, almost corporate, level.

Also the new discipline proposed by F. Archibugi, for that matter, seems to reprise the original model of budget planning, only that this is systematically extended to the other forms of programming/planning, introducing a large dose of rationality.

6. The Third Sub-Period: from the Second Half of the 1990s until the First Half of the Current Decade

6.1. Main Contents

This sub-period is of especial importance because it saw a series of profound administrative and institutional reforms in favour of devolution17 which entailed revision of the statutes of the ordinary regions. As a consequence, there arose theo-retical-methodological approaches to economic planning again different from the previous ones, although they exhibited evident connections with some components of the debate in previous years.

In fact, straddling the two decades was a first resumption of the long-standing dispute on the role of the state in the economy. Attempts were made to configure the regional (and local) dimension of economic policy (Grassi, Cavalieri, 1997) or the territorial embeddedness of economic policies more in general (Garofoli, 1999). Thereafter recognized was a “paradigm shift in the role of the state” whereby its fundamental task was to construct a “collective consciousness” (Barca 2004). However, opposed to these studies were the constraints that (according to a more conventional approach) should be respected in the definition of local development policy, as well as the factors that would make decentralization of economic policy to local level even more complex (Rey, 2004).

Notwithstanding this not negligible controversy, in the second half of the 1990s, a central government structure developed and proposed the so-called “new planning” (Ministero del Tesoro, 1998). Intended to rationalize the spontaneous tendency to localism, sustained by an increasing demand for “subsidiarity” (above all verti-cal), this approach relied on three operational lines – programmed bargaining, area contracts, and territorial pacts – as well as being closely connected to European economic and social cohesion policies, which also underwent further, though less radical, reform in those years.

For some southern scholars there were few elements of continuity even with the extraordinary plan for the Mezzogiorno: in fact, while the dualism between the North and South of the country was denied, it was brought back to the centre of economic analysis and policy. Local development was preached so as to rehabilitate 17. The reference is both to the process of administrative decentralization, whose main provi-sions bear the name of the then Minister Bassasini, launched in the mid-1990s and at the begin-ning of this decade, and especially to amendments made to Title V of the Constitution.

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external intervention, “redeeming” it from the demonization of the then recent past. In order to supersede extraordinariness, the concepts of additionality18 and the speciality of procedures were propounded. All this took place in an operational context where, while some powers were devolved (within a rigidly encoded frame-work, however), central government was assigned the function of evaluating the congruity of the programmes developed by the Southern regional administrations (Giannola, 2000).

Aside from this dispute, following both the already-mentioned difficulties encountered by large part of the regional administrations in implementing the plan-ning method and also its consequent substantial ineffectiveness, there arose in this sub-period the imposition of negotiated planning and programming at local level, while the application of planning was shifted to a lower, regional institutional level, the purpose being to promote development in smaller territorial areas, also on the wave of the strong growth of industrial districts. Moreover, the regions of South-ern Italy were once again subject to a large body of analysis, even though their administrations had almost never participated in the advances thus far achieved in regional planning by those of Central-Northern Italy.

In fact, this new approach of negotiated planning, launched by the central govern-ment at the end of 1996 with the financial law for 1997, besides introducing new instruments at a sub-regional level, primarily based on concertation, identified the principal actors in the central government, on the one hand, and the local authori-ties on the other, entirely excluding the regional administrations (at least initially).

Without discussing all the studies on this theme, it is evident that negotiated planning and the relative instruments for local development (from territorial pacts to Integrated Territorial Projects (IPTs) were analysed not only by scholars working in various disciplines (economists like M. Centorrino, D. Cersosimo and G. Viesti, sociologists like C. Trigilia, etc.) but also by bodies like CNEL, FORMEZ and the Consiglio Italiano per le Scienze Sociali.

Secondly, from these heterogeneous works there emerges confirmation of the assumptions that these new policies for the local development of regions both in the South and Centre-North of Italy were based on a contract between the public appa-ratus and private actors, that they stood in substantial continuity with the previous national economic planning (almost never undertaken) and substantially with the most recent European norms.

Therefore, the theoretical advance in this sub-period most useful for the purposes of regional planning was that which concerned strategic planning, or more precisely, the strategic approach to urban and land planning. In fact, using the metaphor of the plan as a network, R. Camagni (1996) argued that the (urban) plan must above all be used as a coordination tool with which to bring the various projects to a higher level of overall coherence. For this purpose, however, the plan must oper-ate “in a network”, meaning an organizational form manifest as both a network of

18. In the language used in the EU rules the term is “additionality” (co-funding different from national funding).

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individuals and actors within a city and as a network of cooperation among differ-ent cities.

Connected with this conceptual scheme were the proposals of other scholars who, on acknowledging that strategic planning had been hitherto exclusively used for urban and metropolitan areas, pointed out that, in principle, it was also applica-ble on different territorial scales.

Therefore, on a network logic based on cooperation-competition among the different subjects making up an individual local system (city or a metropolitan area or a district, etc.), re-proposed on a larger scale, among the different territorial productive systems that form, for instance, a regional area, were problems of coop-eration-competition that could be addressed by means of strategic planning in order to prevent opportunist behaviour, resource wastage, and reduction in the overall competitive capacity of broader territorial areas. The objectives of this type of plan should be to activate and manage relationships between the network and individual strategic plans developed at a lower level (Ciciotti et al., 1997, pp. 394-395).

The consequence was the diffusion, also at operational level, of a conception of strategic planning that was no longer restricted to urban and metropolitan contexts, as previously, but also aimed at favouring economic development locally and regionally through the valorisation of existing resources. Perhaps for this specific reason, towards the end of this sub-period, some handbooks were published on strategic planning – though understood as the planning of the public administration – for training purposes and based on the technical-theoretical concepts developed and experiences recorded at various territorial levels, including the international one (Archibugi, 2004).

6.2. General Evaluation

It is evident in this sub-period that the theme of regional planning as such disap-peared from the scientific debate, being replaced by the introduction of concer-tation and local governance; although the latter, like strategic planning, cannot be considered a radical advance but rather the simple resumption of procedures already proposed in the previous decade (albeit in a fragmentary and insufficiently thought-out manner).

Therefore, although these latter practices arose almost definitively both in the Italian institutional system and in the connected scientific debate, one may inquire as to whether strategic planning, as hitherto undertaken by the local authorities in Italy, really represented a new type of planning; and, especially, how much more effective it was compared to regional planning.

Another question concerns local-level governance: in which regard one may ask – with clearly provocative intent – whether its success was not due to the need to supersede the regional “neo-centralism” that had emerged in previous years and was obviously opposed by the local bodies, which had found in the state a level of governance with which to ally against the common “enemy” of the regions.

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7. The Fourth Sub-Period: the Second Half of the 2000s

7.1. Main Contents

As said in the introduction, after about a decade in which Italian scholars devoted their research mainly to the study of negotiated planning and the connected policies of local development, in the second half of the current decade one notes a resump-tion of the debate on regional planning; but in comparison with that of the 1990s, it has been enriched with a new element: “multilevel governance”.

In fact, in the past two or three years, initiatives promoted by the AISRe jointly with the Istituto Regionale di Ricerca della Toscana (Tuscany Regional Institute, IRPET) have once again proposed the regional planning of economic development as the object of scientific debate, obviously in light of previous experience not only in the regional domain but also at the European, national and local level, in order to highlight its potential as a factor in territorial competitiveness.

To recover the “lost planning”, to use Bianchi’s (2008) expression, first under-taken has been a further historical reconstruction of the most important experi-ences in regional planning, seeking to grasp the factors that have presumably led to the almost total abandonment of this practice by regional administrations (Malfi, 2008). Then considered has been the situation in all regional administrations, of which only one third continue to draw up planning documents according to more or less up-to-date methodological criteria (Bruzzo, 2008), examining specific schemes ongoing in various regions.

Also emphasised has been the meritorious activity of the Department for Devel-opment and Cohesion Policies (DPP) of the Ministry of Economy and Finance, in flanking the regions culturally and operationally so that they can continue and (if possible) improve their economic planning, although in most cases this lies between EC and negotiated planning (Raimondo, 2008).

Even more significant for the purposes of this paper are studies illustrating the most recent initiatives in regional planning undertaken by Lombardy, Friuli Venezia Giulia and Tuscany,19 from which there emerges (with some differences due to the different approaches used) the crucial shared feature of having adopted stra-tegic planning at regional level. This kind of planning on the one hand simplifies choices and instruments for intervention; on the other, it prolongs its procedural process with the inclusion of new documents – like integrated local development projects (Progetti Integrati di Sviluppo Locale, PISL) – so that the method becomes more applicable thanks to the active involvement of all the different subjects in the region. At the same time, the method should be able to confront, with greater likeli-hood of success, also exogenous problems like globalisation, which in recent years has impacted on regional production systems, with sometimes highly damaging macro-economic effects.

19. See, respectively, Bramanti (2008), Posru (2008) and Cavalieri, Baldi (2008).

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Finally to be mentioned is F. Archibugi’s most recent book on planning theory, in which he tries to retrieve the scientific character of a subject which to date – he argues – has been the victim of political misunderstandings, partial disciplinary uses, and epistemological errors (Archibugi, 2008). Starting from the critical asser-tion that planning theory would express deep disquiet over the direction taken by current analysis of planning experiences – in the economic field but also at urban and regional level – instead of seriously considering the technical-scientific defi-ciencies that underlie various problems encountered in the practice of planning, Archibugi notes that academic analysis has led a sort of political interpretation. Given the impossibility of improving the governance of managerial initiatives and planning policies, planning theory has been reduced to a generic sociological debate that will lead to its demise. In opposition to all this, Archibugi’s book seeks to iden-tify the guidelines essential for relaunching the process and techniques of planning. It envisages a type of neo-discipline which, on the basis of an integrated economic, environmental and sociological approach, would yield the crucial component miss-ing from all previous planning attempts and responsible for their failure.

7.2. General Evaluation

Archibugi’s critique appears in contrast with some of his previous opinions. It therefore warrants a response in regard to the fulcrum of his theory, that is, the endeavour to integrate various types of planning approaches where reference is made to a specific level of government, that of the region, indicating a planning theory with universal validity. Moreover, inadequate consideration is made of the sole concrete regional experience in planning from the specific point of view of integration and which certainly cannot be evaluated negatively. The reference is to the Emilia Romagna Region, whose administration (after having adopted the first PRP) during the mid-1990s abandoned the then predominant approach to adopt a Regional Territorial Plan as the sole planning document for the overall develop-ment of the region (Mattiussi, 2008).

By contrast, the first results of a comparative survey, conducted at European level by the Istituto di Ricerca della Lombardia (IReR), and still ongoing (Bandera, Mazzoleni, 2008), show that that the recent situation in Italy of regional economic planning (despite the criticisms and dissatisfaction referred to above) is consider-ably more advanced than in countries like Spain, France and Great Britain (which are more comparable to Italy in terms of institutional and administrative decen-tralization), and also more advanced than in countries with federal structures like Germany and Austria.20

This entirely unexpected result is due not only to the economic planning instru-ment concerned – the Documento di Programmazione Economico-Finanziaria Regionale, DPEFR – applied pursuant to the law on financial planning and account-ancy, which is clearly more valid than the analogous instruments applied by the

20. This is indirect confirmation of the reduced amount of foreign analysis of REP and/or its scant impact on the behaviour of the public administrations in those countries.

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corresponding regional institutions in the countries mentioned. It also derives from the ability to adopt (at least in some cases) strategic planning at regional level, so that it has become a much broader and more complex approach than the one frequently used at urban level.

8. Common and Critical Aspects

To recapitulate the foregoing discussion, the analysis has shown that at the beginning of the long period considered, the strand of research on regional plan-ning which clearly predominated was the one that viewed planning in traditional terms as a method used by the regional administrations to steer and regulate their socio-economic systems.

In the following decades, two further strands of analysis arose, with differing outcomes. The first concerned itself with negotiated planning applied at a mainly sub-regional level so as to foster economic development mainly in still backward geographical areas in the Southern and Central-Northern regions. The second area of study, which drew on the English-speaking literature, had the original meaning of REP evolve into strategic planning, which was also adopted at regional level because it was mainly understood as an instrument for governance of the overall socio-economic system. Also this latter strand of inquiry should be considered an evolution of the original model, and it sought to reduce its critical aspects most manifest in inefficiency, making that approach to planning more viable, even if this came about in only a small number of regions.

More recently, moreover, also the traditional model has shown signs of vitality, seeking to re-assert its soundness, despite the limited number of successful results obtained by regional administrations like Veneto, Puglia, Sardinia, and the two autonomous provinces of Trento and Bolzano.

Restricting discussion to the two strands of inquiry (traditional and strategic) referring to the regional government level, now highlighted are both their main critical and shared features. (Table 1)

The critical aspects of the first strand of inquiry concern the insufficient attention paid to exogenous phenomena, although these are particularly important in systems by definition “open” like those of regions because they have further reduced the already scant capacity of the regional administrations to guide the economic systems that they administer due to the increase, on the one hand, in economic, commercial and productive interrelations with other economic systems at an inter-national level, and on the other, in the number of variables beyond the control of those public administrations. In fact, there is no evidence of theoretical contribu-tions whereby the original model has been integrated so as to make it more efficient for administrations to adopt.

Another shortcoming of the first strand of inquiry is that it has only rarely addressed the issue of the actual economic-financial convenience of a type of regional planning so costly in terms of resources (human, technological, etc) as

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Table 1 - Synopsis of the Features Distinguishing the Main Strands of Analysis of REP during the Period Considered

Strand of analysis 1: Regional planning understood as a method of governance for the overall socio-economic system by the regional administration

Period of predominance: From the first half of the 1970s to the first half of the 1990s

Aim(s): Foster the socio-economic development of the territory administered

Coverage: The entire regional territory without specific criteria for selection of the areas on which to concentrate resources

Resources: Only the resources allocated by the regional budget

Distinctive feature: Especial attention to the analysis of development factors and the relative theoretical model

Critical feature(s): Limited attention to exogenous phenomena and onerousness of the approach preferred; consequent restricted effectiveness

Strand of analysis 2: Negotiated planning of development at sub-regional level

Period of predominance: From the second half of the 1990s to the first half of the following decade

Aim(s): Promote concrete development in backward areasCoverage: Territorial areas of small size (local production systems)

Resources: Coordinated state and EC resources, as well as partial coordination with land planning instruments

Distinctive feature: Adoption of a more pragmatic approach in which attention is paid to governance, but only with reference to local administrations

Critical feature(s): At least initially, non-involvement of the regional administration; effectiveness restricted to a few geographic areas

Strand of analysis 3: Strategic planning applied at regional level

Period of predominance: Current decade

Aim(s): Concentrate actions on a limited number of more important projects with greater likelihood of success

Coverage: The entire regional territory but divided into areas on which to concentrate resources in agreement with local actors

Resources: Resources both public and private coordinated within specific territorially-related projects

Distinctive feature:

Attempt to transpose to regional level an approach previously adopted at urban level through the effective involvement by the re-gional administration of the various actors, both public and private, operating on regional territory

Critical feature(s):Need for a homogeneous socio-political and institutional context, as well as advanced technical abilities, to obtain results of a certain importance

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that advocated by various scholars on the grounds that it is nevertheless the most suitable one from the political-institutional point of view.21

The other strand of analysis has been driven not only by the latter consideration but also by the evident widespread inability of regional administrations to apply the traditional model in an Italian context long characterized by an institutional order not only incomplete and fragmentary but also markedly diversified (consider the special statute regions). Consequently, attempts have been made to render the original theoretical framework easier to apply by drawing on methodological approaches devised for individual administrative structures, above all foreign, and trusting that the new approach will be adopted by the decentralized administra-tions, which, however, are frequently characterized by considerable backwardness in their managerial cultures.

In short, these two strands of study can be placed at the two extremes of a possi-ble range of application of planning (the entire socio-economic system in the former case, the sole regional administration in the latter), with some features in common, especially in their more recent forms, that evidence some sort of convergence.

The first feature is the attention paid to governance both within the public sector and various private institutions, although the responsibility assumed by the two components of the overall regional system in applying the plan seemingly differs in role and weight: in the former strand, in fact, leadership remains in the hands of the political decision-makers, while in the latter, private actors tend to be more closely involved in decision-making.

A second feature, closely connected with the first, is the involvement of various portions of the region in the implementation of the overall planning design, aiming for local economic-productive development, achievement of which requires the combination of conventional regional planning instruments with the newer ones of negotiated planning.

The final shared feature, certainly not reassuring, is the limited impact achieved to date by both models on the overall regional system, given that only one-third of all the Italian regions adopt one of the two approaches. In fact the majority of the regional administrations seem at present unwilling or unable to apply a plan-ning method, and therefore restrict themselves to administration. They thus forgo a major component of their autonomy by relying on methodological schemes and operational programmes borrowed either from the European Union (in the case of

21. In regard to this contention, however, to be noted is A. Barbera’s argument that the fact itself that regional plans are drawn up is important because (despite structural constraints in practice) it should be borne in mind that these plans: a) set political discussion on a broader basis; b) enable discussion between political power and social forces on planning objectives as well as on the measures to adopt; c) provide a basis for comparison between the problems to adddress and the resources available; d) constitute a useful contradiction between the need to plan future development and constraints imposed by resources already largely formed; e) once approved and implemented, provide benchmarks for control by the representative bodies like the Regional Councils. Taken from Barbera (1980), p. 18.

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community planning) or from the central government (in the case of negotiated planning).

9. Unresolved Issues and the Future Prospects of the Discipline in Italy

9.1. The Role of Regional Planning

Despite recent declarations by a number of scholars recommending the use of REP, the first issue to be addressed is whether this discipline still has some signifi-cance in Italy and what its effective role is above all in the current phase of struc-tural economic-financial crisis.

Obviously, answering these questions would fall outside the scope of this article, which has instead preferred to review studies produced by Italian regionalists but seeking to highlight elements in favour of strengthening and expanding economic planning at regional level.

Accordingly, there follows brief discussion of a number of issues, three of which are technical in nature, and three political-institutional.

9.2. REP Interaction with Territorial Planning at a Regional Level: Towards an Integration of the Two Disciplines?

The first of the three technical questions is disciplinary in nature, for it concerns how REP can be tied more closely to urban-territorial planning, given that the fundamental resource on which both intervene (with different approaches) is the regional territory.

A first, somewhat problematic, confirmation of the existence of a close relation-ship is furnished by the implications of the evolution of policies on regional and local development towards forms of concertation ranging from negotiated plan-ning – in its various forms – to the devising of strategic plans at urban level. This evolution from recent practice undoubtedly favours integration between REP and territorial planning, but how it does so has not yet been determined, for two main reasons:

the presumed presence of a theoretical problem requiring specific examination; -an indubitable difficulty of an institutional nature, because recourse to the urban -level by strategic planning is still not obligatory with respect to the general regu-latory plan, and now the municipal structural plan.In any case, it seems that this issue has not been adequately addressed by Italian

regionalists, although one may argue that a solution would be more easily found if the question were put in the following terms: is close and organic coordination sufficient, also among corresponding planning documents at regional level, or is it preferable to reach true integration at disciplinary level?

If we refer to F. Archibugi’s views published in works over the past twenty years, the answer may not be in favour of the second solution, that is, a fusion into one

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single planning theory. This does not seem easy to apply in practice, if we consider the structures with which large part of Italian regional administrations work.

Consequently, some consideration should also be made of the first hypothesis, Suggested here is the adoption of this planning method by all the organizational sectors of the regional administrations, conceiving it as a transversal activity, not the sectoral one as it is instead conceived in operational terms, perhaps being assigned to the offices of the regional Presidency. Consequently, this problem could find a valid solution from an operational point of view within the organizational locus of public administrations, more than in that of the different disciplines that head the various forms of planning.

9.3. The Use of Evaluation

As said, a shortcoming of most experiences of traditional regional planning in Italy is the lack of effective employment of various forms of economic evaluation.

Two paradoxical aspects arise. The first is that well-known methods of economic evaluation like, cost/benefit analysis etc., have always proved difficult to incorpo-rate into a systematic planning procedure, despite attempts by various levels of government. The second aspect is the closer attention being paid to evaluation in urban-territorial planning.

Nevertheless, there are various elements which suggest that decidedly greater use could be made of economic evaluation in economic planning. Some of these elements, omitting the socio-political ones, can be briefly presented thus:

an association, founded about ten years ago, which has already produced valu- -able results (Palumbo, 2001);the availability of a wide range of instruments and methods that can certainly -find application in various forms of regional planning (Pompili, 2006);the advances also achieved in the methodology of assessment in parallel with -those in planning that has led to a new form of the former, strategic evaluation (Ciciotti, Dallara, 2005). To be noted in this regard is that strategic assessment is not just a methodology, but in its ex ante version it is an integral part of the plan-ning process itself. If in fact the objective is governance, then strategic evalu-ation becomes an essential means with which to increase the plan’s likelihood of success. In this case, too, these are aspects that have not been yet sufficiently clarified on the theoretical and methodological level.

9.4. The Relationship Between REP and Research Activity

A final technical question, which has not yet been mentioned, is the close rela-tionship between REP and the socio-economic research carried out at regional level for the purposes of planning.

One must acknowledge the fundamental role played by regional research insti-tutes since the first sub-period considered here until the end of the 1970s, when they

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organised an important conference which led to a specific publication in which the various issues were addressed (Istituti Regionali di Ricerca, 1980).

Many other works have reflected on the methods to adopt and the analysis to conduct within REP analysis, paying attention to input-output analysis on a regional scale, by researchers such as those at the University of Venice (Costa, 1978) and the already-mentioned research institutes, especially that of Tuscany.

Another strand of analysis is the one which has dealt with the schemes of analy-sis and accountancy in general deemed best suited to constructing a systematic regional information system. In this case, too. a number of scholars, like La Bella, Lunghini, Camagni etc, and research institutes, among them IASI and IReR, have fruitfully contributed to this field since the first sub-period.

Although this relationship has been strongly conditioned by the closure or retrenchment of some research institutes, it continues to be carried forward, as testified in particular by the large-scale prospective study conducted by IRPET with a view to the most recent PRS of the Tuscany Region (Petretto, 2005). This, in effect, reaffirms the fundamental role of prospective analysis in determining the most important socio-economic problems in the regional territory, as well as prob-lems that may arise during a plan’s time span, for the simple reason that planning goals should logically be established in relation to such problems.

9.5. The Diffusion of Best Practices and the Improvement of Non-Optimal Situations

Turning to issues of a political-institutional nature, current analysis concerns how to foster the diffusion of the best practices in regional planning that have been mentioned or with which to improve the situation in those regional administrations which cannot yet be considered optimal.

In regard to this issue as well, which in fact should pertain to a supra-regional body like the State-Region Conference, Italian regionalists have not made any contribution worthy of mention, perhaps because it is an issue that falls outside their disciplinary remits.

However, one may envisage a cooperative solution consisting in the “twinning” between a region with a methodologically valid development plan and another or several regions similar in socio-economic or political-ideological terms but without such a plan and interested in adopting a document patterned on the same model. This system would obviously improve the quality of planning in regions to some extent inadequate in this regard by identifying the causes of their unsatisfactory performance and trialling specific solutions more functional to the purpose.

9.6. The Pursuit of Inter-Institutional Coherence

Very similar to the previous issue is how to devise planning models coherent among different levels of government so that regions can operate in synergy with both higher and lower levels of government so as to give greater efficiency to their

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economic policies. However, this issue is in part already resolved, given that on the one hand all regions adopt a planning approach methodologically homogeneous with that of the European Community, and on the other, the majority of them have defined and adopted arrangements whereby local authorities can participate in the drafting of the PRS so as to facilitate its implementation.

The main problem in this regard therefore seems to be the coherence of real plan-ning between the regions and the central government, given that for some decades the latter has not drawn up an economic plan but has merely adopted the DPEF, although this is a document much more generic than the corresponding plans devel-oped at regional level, bearing the different territorial contexts in mind.

In the case of this shortcoming, too, Italian regionalists do not seem to have put forward concrete proposals, apart from some isolated studies as mentioned at the outset, perhaps because they believe that the problem of the lack of economic plan-ning at national level is purely a matter of political will.

9.7. Planning in a Regional Financial System Based on Fiscal Federalism

Finally considered is an extremely important topic, but one so far-reaching that it can only be given partial treatment here. It seems obvious that there is a close connection between regional planning and the system by which the regional admin-istrations are funded, in the sense that if this is characterized by a higher level of financial autonomy, it entails a decidedly more complex commitment at the plan-ning level. This topic has been the subject of a broad and constructive body of studies, given that it has always attracted the interest not only of regionalists but also of public finance researchers, economists, and jurists.

Cited by way of example here is the book containing the proceedings of an AISRe conference held in the second half of the 1880s and attended by numerous scholars (Giardina, Magnani, Pola and Sobbrio, 1988), both Italian and foreign. The book covers almost all aspects of the various systems of inter-governmental financial relations, among them that of fiscal federalism, to which erroneous refer-ence is often made.

Besides those already cited, mention should be made of other economists who have contributed considerably to the scientific debate, also at international level, such as R. Brancati, G. Brosio, G. Cerea, P. Giarda, G. Muraro, S. Piperno and A. Zanardi. All these scholars have sought to delineate a responsible and solid fund-ing system for the regions – though fulfilling the principles of financial and fiscal autonomy and tax – and therefore compatible with the marked socio-economic disparities still present among the Italian regions.

Separate mention should be made of R. Cappellin, who in several works has put forward a conception of fiscal federalism somewhat different from the conventional model of public funding. He argues, in fact – in the light of the implications of the economic changes then taking place in Europe – in favour of reform of the model of inter-institutional and financial relationships then predominant, and a funding

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system based on the logic of cooperation and interregional networking (Cappellin, 1995 and 1996).

However, since then the debate has increasingly assumed a merely politi-cal connotation permeated by ideologies very distant from this last theoretical approach, which has remained almost entirely unapplied.

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Roberta CapelloThirty Years of Regional Science in Italy: An Introduction Trent'anni di scienze regionali in Italia: un'introduzione

PART 1. REGIONAL DEVELOPMENT AND GROWTHAntonio G. CalafatiMacro-Regions, Local Systems and Cities: Conceptualisation of Territory in Italy since 1950Macro-regioni, sistemi locali e città: la concettualizzazione del territorio italiano dal 1950Gioacchino GarofoliRegional and Local Development Sviluppo regionale e localeRoberta CapelloMacroeconomic Regional Growth Models: Theoretical, Methodological and EmpiricalContributionsModelli macroeconomici di crescita regionale: contributi teorici, metodologici ed empirici

PART 2. KNOWLEDGE, INNOVATION AND REGIONAL DEVELOPMENTEnrico CiciottiInnovation, Technological Diffusion and Regional DevelopmentInnovazione, diffusione tecnologica e sviluppo regionaleRiccardo CappellinKnowledge Economy and Service ActivitiesEconomia della conoscenza e servizi

PART 3. URBAN ECONOMICS, MODELS AND REGIONAL ECONOMICPLANNINGRoberto CamagniAgglomeration, Hierarchy, Urban Rent and the CityAgglomerazione, gerarchia, rendita urbana e la cittàLidia DiappiModels in Understanding and Planning the City I modelli nell’analisi e pianificazione della cittàAurelio BruzzoRegional Economic PlanningProgrammazione economica regionale

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