In this paper we estimate the current account of the balance of payments of Italy’s Southern and Northern regions for the period 1998-2000. In our scheme the General Government is considered as a non-resident institution; fiscal revenues and expenditure generate credits and debts in the balances of payments of the South and the North. We find that the wide deficit on goods and services of the Southern regions – as estimated by the Regional Accounts - is counterbalanced by income and transfers of the same order of magnitude, mostly originated by the re-distributive activity of General Government. A large part of this redistribution depends on personal income inequality, even if it has distinguishing territorial marks because of smaller employment rates and the concentration of lower income households in the less developed regions. The re-distribution increases disposable income in Southern regions, raising consumption expenditure and investment. Over the years the Southern deficit on goods and services has markedly shrunk; the reduction is correlated with the slowdown in the rate of capital accumulation. The balance of the current account of Southern regions, though subject to measurement errors, turns out to be nearly zero in the examined period. Thus, net financial inflows or outflows should be of limited amount.
Published in 2006 in: L. Cannari, F. Panetta (a cura di), Il sistema finanziario e il Mezzogiorno: squilibri strutturali e divari finanziari, Bari, Cacucci
