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Credit, venture capital and regional economic growth

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Abstract

In this paper we investigate the role of credit and venture capital investments on regional economic growth. In particular, the paper investigates the nexus between finance and regional economic growth by means of an international comparison, making joint use of banking system structural indicators (i.e. the predominance of mutual bank circuits or large commercial banks) and risk capital values obtained in a local context. The dataset consists of a panel of 53 regions belonging to three countries, Germany, Italy and Spain, for the period 1995–2008. To avoid a problem of endogeneity, we estimate a dynamic panel using the generalised method of moments (GMM). The results underline the important role played by different types of financial intermediaries in regional economic growth: both mutual and commercial banks have a strong positive effect on regional economic growth, but the role of mutual banks is greater in economically deprived areas [EDAs]. Finally, the positive effect of venture capital investments is also more effective in EDAs regions.

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Notes

  1. The Nomenclature of Territorial Units for Statistics (NUTS) was produced by Eurostat in order to provide a single, uniform breakdown of territorial units for the compilation of regional statistics for the European Union. The NUTS classification is a hierarchical system for dividing up the economic territory of the EU, also for the purpose of the harmonisation of EU regional policy. NUTS level 2 data correspond to regions for Italy and to autonomous communities for Spain. For Germany, we use NUTS level 1 data, corresponding to Länder.

  2. For a review of the literature see Levine (2005).

  3. We also use in the estimation the original annual data obtaining similar results. These results are available on request.

  4. EDAs identified in the three countries are the following. For Germany: Brandenburg, Mecklenburg-Vorpommern, Sachsen, Sachsen-Anhalt, Thüringen. For Spain: Andalucía, Canarias, Cantabria, Castilla y León, Castilla-la Mancha, Comunidad Valenciana, Extremadura, Galicia, Principado de Asturias, Región de Murcia. For Italy: Basilicata, Calabria, Campania, Molise, Puglia, Sicilia.

    Other regions (Non-EDAs) identified are the following. For Germany: Baden-Württemberg, Bayern, Berlin, Bremen, Hamburg, Hessen, Niedersachsen, Nordrhein-Westfalen, Rheinland-Pfalz, Saarland, Schleswig-Holstein. For Spain: País Vasco, Comunidad Foral de Navarra, La Rioja, Aragón., Comunidad de Madrid, Cataluña, Illes Balears. For Italy: Piemonte, Valle d’Aosta, Liguria, Lombardia, Trentino Alto Adige, Veneto, Friuli-Venezia Giulia, Emilia-Romagna, Toscana, Umbria, Marche, Lazio, Abruzzo, Sardegna.

  5. Recall that the growth rate of a variable Y t can be approximated according to this formula \( \frac{Y_t-{Y}_{t-1}}{Y_{t-1}}\approx \log \left(\frac{Y_{t-1}}{Y_t}\right) \). Applying the properties of the logs we obtain \( \frac{Y_t-{Y}_{t-1}}{Y_{t-1}}\approx \log {Y}_t- \log {Y}_{t-1} \). Note that in Eq.(1) log Y t  = y i,t and log Y t − 1 = y i,t − 1 hence we have \( \frac{Y_t-{Y}_{t-1}}{Y_{t-1}}\approx {y}_t-{y}_{t-1} \).

  6. Similar results are also obtained by using annual data. These results are also available on request.

  7. The quantiles used in the panel quantile regression are determined on the basis of regional growth rate over the period 1995–2008 for our sample of 53 regions so, for example, in Q10 we find the 10 % of the regions with the lowest growth rate. Differently, EDAs regions are identified disaggregating into quartiles the 177 European regions on the basis of per capita GDP (levels) in 1995. In particular, EDAs regions are the ones belonging to the first quartile of this larger sample.

  8. The results on the inclusion of the control variables and the panel quantile regression are available on request.

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Authors and Affiliations

  1. Department of Economics “Marco Biagi”, University of Modena and Reggio Emilia and ReCent, Viale Berengario 51, 41121, Modena, Italy

    Barbara Pistoresi

  2. Department of Economics “Marco Biagi”, University of Modena and Reggio Emilia and Cefin, Viale Berengario 51, 41121, Modena, Italy

    Valeria Venturelli

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  1. Barbara Pistoresi
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Correspondence to Valeria Venturelli.

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Pistoresi, B., Venturelli, V. Credit, venture capital and regional economic growth. J Econ Finan 39, 742–761 (2015). https://doi.org/10.1007/s12197-013-9277-8

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