Production sophisticatedness and growth: Evidence from Italian provinces before and during the crisis, 1997-2013

In this article - following the methodology developed by Hausmann et al. (Hausmann, R., Hwang, R., Rodrik, D. (2007) What you export matters. Journal of Economic Growth, 12: 1-25) - we investigate the evolution of production sophisticatedness of Italian provinces in the period 1997-2013 and the importance of the degree of 'complexity' of the provincial production bundle for subsequent economic growth. The analysis at a sub-national level, NUTS3, allows us to identify the spatial structure of economic complexity and the patterns of converge/divergence in this important ingredient of economic performance. We find evidence of a convergence in provincial production complexity during the pre-crisis period. Besides, we highlight using panel estimates a significant role of product sophisticatedness as an engine of growth. The current crisis has halted this convergence process and has asymmetrically affected provincial areas, substantially increasing the heterogeneity of provincial trajectories, in particular in the least developed parts of the country.