When Growth Strategies Fail

This chapter focuses on the historical roots and changes of the Italian growth regime by considering wage-setting institutions, product market regulation, the financial system, and welfare policies. It shows that Italy is characterized by a regionalized growth regime, where central and northern regions are export-led with strong specialization in advanced manufacturing, while southern regions are demand-led, supported by public spending, with a large share of employment in public administration. The authors demonstrate that Italy has lacked a coherent growth strategy to coordinate the two growth regimes. On the contrary, pursuing different trajectories within the same national context has consolidated the dualized nature of the Italian growth regime. The chapter highlights the importance of internal political choices and the role played by various governments to understand the reasons for these divergent trajectories that reproduce low employment and productivity growth and social inequalities.