Testing and Explaining Economic Resilience with an Application to Italian Regions

Abstract

This paper proposes a formal testing procedure for distinguishing between engineering and ecological resilience, by fully exploiting the properties of the non-linear smooth-transition autoregressive (STAR) model. A two-steps’ empirical strategy is adopted for measuring, comparing and explaining the ecological resilience of regional economies to aggregate business cycle’s variations in a multi-regime environment. The relevance of evolutionary patterns for analysing regional resilience is deeply discussed. The empirical investigation is conducted for the Italian case, by looking at the dynamic of regional employment growth over the period 1992-2012. Differences in regional resilience among Italian regions are explained by the concentration of manufacturing activities, highly productive regional exports, financial constraints, human and social capital. Some concluding suggestions introduce possible future areas of research in line with the more recent literature on this topic.