Why growth rates differ? Path of innovation in Italian provinces

This paper analyses the way in which innovation and absorptive capacity affect the productivity of Italian provinces. It builds on the neo-Schumpeterian literature which investigates how technology gaps explain development disparities between countries and regions. The study is carried out at the provincial level, which allows a more finetuned analysis of the resource endowment linked to knowledge generation and economic performance. Main results indicate a case of divergence in productivity levels instead of one of catching up among the Italian provinces; moreover, they suggest that the main effort to get productivity gains in this country has been carried out through a reduction of employment and of its related costs, instead of via increasing R and D and human capital.