Regional Activity and Participation in National and International Value Chains: Evidence for Italy

Abstract

This study examines the participation of Italian regions in the international economy by utilizing indicators from empirical intercountry input-output analysis, primarily with an empirical intent. First, it investigates how foreign demand contributes to regional value added through both direct and indirect trade in goods and services. The findings reveal that the relative significance of these direct and indirect pathways in bilateral value-added exports is influenced by the characteristics of both the regions and the destination countries. Indirect pathways, which involve trade through other regions, tend to be more significant for smaller regions and destination countries, and for the South. Conversely, direct pathways are more important for larger territories and countries with contiguous borders. Secondly, the study analyses the many ways regions engage in international value chains and identifies common patterns among them. It finds that regions that participate by providing a relatively higher proportion of domestic value added compared to foreign input are typically those where, in addition to a strong manufacturing sector, advanced services and innovative activities play a significant role in their economic structures. These regions are primarily located in the major Center-Northern areas, along with a few in the South.