ISSN 2704-6303 
Come si può valutare la capacità di una economia regionale di favorire le attività imprenditoriali? Questo articolo utilizza i dati originali dell’indagine della Banca Mondiale Subnational Doing Business per analizzare la facilità con cui imprenditori fanno impresa nelle regioni italiane, a livello NUTS-3. Comparando i dati tra regioni e nel tempo, siamo in grado di identificare pratiche virtuose adottate a livello locale che possono essere promosse altrove dai policy-makers per migliorare la situazione generale delle regioni italiane e dell’Italia nel suo complesso. [SCARICA IL PDF – DOWNLOAD THE PDF]
Introduction
As it is well-established in the literature (Dunning, 1980; Ascani et al., 2021), in order for a place to stimulate business demography and attract investments, there must exist what scholars define locational advantages, i.e. reasons for firms for operating in a specific place, such as access to large markets, favorable tax regimes, easy bureaucratic procedures, lower production costs, lower institutional barriers, and lower risks. For over 15 years, the World Bank produced subnational quantitative indicators (Subnational Doing Business, SNDB) specifically created to evaluate how easy it is to do business in different locations within a country, under the idea that country-level analyses may hide large within-country heterogeneity.
In this paper, we embrace the idea that a conductive environment stimulating investments and business creation is a crucial condition to sustain economy and job market. As a result, through the analysis of SNDB indicators in a sample country, we aim at disclosing policy recommendations that may advice policy-makers in the implementation of local-level reforms aimed at improving the business environment. We focus on the case of Italy, as it represents an ideal case-study of a country both dramatically hit by crises occurred in last years and characterized by sharp internal disparities.[1]
Empirically, we make use of an original dataset including SNDB scores for 13 NUTS-3 regions in Italy, collected in two rounds in 2012 and 2019. First, we present the latest data in order to demonstrate the relevance of a sub-national approach. Secondly, we compare 2019 scores with those collected in the previous round. By analyzing the two datasets, we are able to identify good practices and, based on those, we formulate policy recommendations.
The paper is structured as follows. Section 2 introduces 2019 SNDB scores for Italy; Section 3 compare the two rounds of data; Section 4 formulates policy recommendations; Section 5 concludes.
The World Bank 2019 subnational assessment of the Italian business environment
The 2019 Subnational Doing Business in Italy study targeted 13 Italian NUTS-3 regions located throughout the country, thus providing a comprehensive picture of the whole Italian territory.[2] The methodology considers 5 macro-areas, which are relevant to characterize the performance of a location in terms of its business environment.[3] These areas are: (i) starting a business, (ii) dealing with construction permit, (iii) getting electricity, (iv) registering property, and (v) enforcing contracts. Each of the above area is evaluated according to three categories – i.e. number of procedures, time, and cost – with the aim of measuring the efficiency of regulations and of their implementation.[4] The final score a location gets ranges from 0 to 100, the higher the better. All in all, a location is virtuous the faster is its record in the above areas, the lesser the number of procedures, and the lower the costs. Each area is measured based on a standardized case study.[5]
The study shows significant heterogeneity in the performance of Italian cities, to the extent that entrepreneurs face different regulatory hurdles depending on where they establish their business. Of the 13 EU member states assessed by the World Bank using the same methodology, Italy registers the largest subnational variation.[6] Table A1, in the Appendix, reports subnational statistics split by European countries. Last column indicates the average difference between the minimum and maximum scores obtained by each country in each of the macro-area under analysis. Italy, with an average difference of 10.84, is at the top of the ranking, followed by Croatia and Romania (9.38 and 8.68, respectively). The more homogenous country, the Netherlands, reports a value that is almost a fourth of that of Italy.
No single Italian city does equally well in all areas measured: each indicator is led by a different city, and cities that do very well in one area perform poorly in others (Fig. 1). Starting a business is easiest in Ancona and Milan, while Ancona scores second to last on getting electricity, and Milan is last on construction permits. Cagliari and Turin lead on construction permitting and enforcing contracts respectively, but they lag behind the other cities on registering property. Rome is the easiest city to register a property, but the hardest to start a business.
Figure 1 – A different city ranks highest in each of the five areas measured
Source: World Bank, Subnational Doing Business in Italy.
Note: The scores are normalized to range from 0 to 100 (the higher the score, the better).
Differences across cities are particularly large in some of the measured areas (Fig. 2). One telling example: in Bologna, the authorization to excavate and install a new electricity connection is issued by one single agency (the municipality) in 30 days. An identical project in Palermo requires 15 approvals, bringing the waiting time to six months. Even going to Court can look radically different. Entrepreneurs in Turin can expect to solve their disputes in a bit more than 2 years. In Reggio Calabria, it takes more than twice as long.
Figure 2 – Subnational gaps vary depending on the area
Source: World Bank, Subnational Doing Business in Italy.
Note: The scores are normalized to range from 0 to 100 (the higher the score, the better).
Time is the variable that shows the most significant variation across the five areas. On average, the difference between the slowest and fastest location is about 140%. One example is the time needed for dealing with construction permits: it takes 105 days in Milan, but more than three times longer in Reggio Calabria. Similarly, getting electricity requires two months and a half in Bologna and Rome, but almost eight months in Palermo (Fig. 3).
Figure 3 – Time is the dimension that varies the most across the five indicators
Source: World Bank, Subnational Doing Business in Italy.
These subnational variations suggest that each city may largely improve its own performance by replicating more efficient standards employed elsewhere.
A comparison with the previous round
Prior to the 2019 edition, a subnational measurement was performed in Italy in 2012 with a largely comparable methodology.[7] A comparison of the nine cities[8] and four areas[9] that have been measured both in 2012 and 2019 highlights two interesting results. First, it shows a clear average improvement of the Italian business environment (see Table A2, in the Appendix). On 9 of the 12 comparable indicator categories, average results are better in 2019 than in 2012 (Fig. 4).[10] For example, the average time for resolving a commercial dispute across the nine cities decreased from 1,438 days to 1,165, a drop equal to over nine months. Milan provides a concrete example of how these results were achieved: the city Court introduced regular strategic planning and monitoring and evaluation, which helped reducing the time to resolve a commercial dispute by 10 months compared to 2012.[11] Additionally, Milan was the first city to pilot a new staff-support program for judges, called Ufficio per il Processo. The program creates a “judge’s office” of sorts, by allowing professional judges to apply for a trainee and honorary judges[12] to support them in leveraging their workload.
Similarly, the average time to obtain construction permits decreased of about two months between the two rounds. Cagliari offers a paradigmatic example of successful reforms: it is in fact the only of the measured cities that merged the one-stop shop for productive activities (SUAP) and the one-stop shop for construction (SUE) into one single authority, operating through the same digital platform. This helped reducing the time needed to complete the permitting process from 268 days (or 9 month) as in 2012 to 115 days (less than 4 months) in 2019.
FIGURE 4. The time to resolve a commercial dispute and the time to obtain construction permits decreased in seven cities out of nine
The second interesting result is that, despite differences across cities remaining substantial, performances are more homogeneous in 2019 compared to 2012. For example, the cost for opening a business is now the same in all cities,[13] while in 2012 it was varying from 8.5% of income per capita (as in Bologna) to 17.5% (as in Naples). Or, on registering property, the process in currently the same throughout the cities, requiring four steps anywhere, while in 2012 different steps applied depending on the location.
The main reason for the increased homogeneity is the introduction of IT tools that are operated at the central level. The starting a business and the registering property processes today are almost entirely electronic, and differences across cities are minimal. For example, all registration applications for limited liability companies, no matter in which city the new company will operate, must be filled electronically with the Register of Enterprises, managed by the Chambers of Commerce. Thanks to information sharing among agencies, the process of registering with the Revenue Agency and the social security administration, and of obtaining accident insurance, can be completed through a single notice sent to the Register.
Similarly, to transfer a property currently several operations can be completed using national web-based tools for registration and transcription of ownership changes. These measures allow notaries to access and update the cadastral and land registry records online.
Even an area which strongly depends on local Courts gained homogeneity- despite differences remaining substantial- compared to 2012. The difference between the fastest and slowest location to resolve a commercial dispute decreased by nearly a half, from 1,167 days (or 39 months) in 2012 to 610 days (or 20 months) seven years later. National IT tools helped also in this case: the case-filing today is done electronically, making filing a commercial lawsuit and serving a defendant business standard, fast and easy across the country.
Policy recommendations
Regional disparities represent a drawback of the Italian business environment, but they also provide hints for policy reforms. In fact, replicating local good practices at national level has the advantage of not requiring major legislative overhaul. Moreover, they have already been successfully tested within the country.
Overall, a number of general recommendations can be brought to light. First, the introduction of IT systems with centralized management could drastically contribute to speeding up applications and to making the procedures predictable, transparent, and easy to be understood. Secondly, increasing the coordination among agencies is essential to reduce waiting times, given that entrepreneurs have to engage very often with many agencies in the framework of the same application. Third, even in areas where all Italian cities struggle, local good practices do exist. Adopting all of them throughout the country would bring tangible benefits and pave the way for larger improvements.
Dealing with construction permits represents a useful example of an area that would tremendously benefit from the introduction of a centralized IT system. The introduction of digital tools currently depends on the initiative of local authorities. Bologna, Cagliari, Padua, and Turin already switched to fully electronic systems for administering building permits, resulting in a 25% decrease in the waiting times compared to the rest of the cities. However, rather than having each municipality or agency develop its own technology platform, a national digitalization plan as the one implemented to start-up companies or to transfer a property should be designed. This should involve all stakeholders, from central to local authorities to professional associations and the Chambers of Commerce. A national solution would be simpler and less expensive to implement and maintain, due to the benefits of scale, than multiple municipal systems, and it would prevent municipalities and agencies each from reinventing the wheel and from developing incompatible systems. Italy can draw from the positive experiences of the above-mentioned cities to develop and design such national platform.
Regarding the need to improve the coordination among agencies, a telling example is on the starting a business area. One of the steps required to open a business is sending an electronic notification to the regional labor office about workers’ employment. The paradox is that, for the purpose of sending such electronic notification– which would be a smooth and fast procedure per se– in most cities entrepreneurs need to go through a complex and lengthy in-person process to obtain access to the e-portal. To avoid this, many companies end up hiring a labor consultant that already has access to the e-portal. This adds to the cost and complexity of starting a business. Once again, local good examples that can be adopted nationally exist: in Milan and Turin, in fact, the labor office automatically obtains the needed information from the Social Security Administration or from the Chamber of Commerce, with no extra interaction required from the side of the new company.
Finally, enforcing contracts is the typical area where all Italian cities need urgent improvements, especially because of the long time it takes to resolve commercial disputes in any of the country Courts. Even in this case though, leveraging on the existing local good practices should be the first step to reduce waiting times[14] and matching judges’ expertise to cases, as done in Milan and Turin, the fastest cities in this area according to World Bank 2019 data. Increased automation would also help in balancing workloads: for example, automated case assignment— as in Bologna and Naples—which considers each judge’s current caseload, could help prevent judges from becoming overburdened and promote faster judgment issuance. Or Courts could draw inspiration from Florence’s Giustizia Semplice model to promote mediation services and alternative dispute resolution.
Conclusions
Excessive bureaucracy at any time is a burden on companies, and in the aftermath of the coronavirus crisis it is an additional hurdle that jeopardizes the ability of small to medium enterprises to survive and diminishes the incentives for entrepreneurs to invest in a place. Many factors determining firms’ competitiveness manifest at the subnational level. For this reason, analyzing and drawing lessons from existing subnational data on the business environment is essential. Using the example of Italy, this paper highlighted how identifying local good practices and promoting them to national standards is one of the most powerful tools in the hands of policy-makers to sustain firms’ creation and growth, reduce spatial inequality, and help creating economic opportunities.
References
Ascani A., Bettarelli L., Resmini L., Balland PA (2021), “Global networks, local specialisation and regional patterns of innovation”, Research Policy, 49
Dunning JH (1980), “Toward and Eclectic Theory of International Production: Some Empirical Tests”, Journal if International Business Studies, 11: 9-31
World Bank. 2013. Doing Business in Italy 2013: Smarter Regulations for Small and Medium-Size Enterprises. Washington, DC: World Bank Group.
World Bank. 2019. Doing Business in the European Union 2020: Greece, Ireland and Italy. Washington, DC: World Bank.
[1] By way of example, regional GDP growth in Italy ranged from -13 to +13 in the period 2007-2018. Similarly, business demography varied widely at regional level, with the number of active firms registering a maximum of +10,700 and a minimum of -5,500 in the same period. Source: Eurostat.
[2] These regions are: Marche (represented by Ancona), Puglia (Bari), Emilia-Romagna (Bologna), Sardinia (Cagliari), Tuscany (Florence), Liguria (Genoa), Lombardia (Milan), Campania (Naples), Veneto (Padua), Sicily (Palermo), Lazio (Rome), Piedmont (Turin), and Calabria (Reggio Calabria).
[3] Publication available at:
https://www.doingbusiness.org/content/dam/doingBusiness/media/Subnational/DB2020-SNDB-ITALY.pdf. The study is part of the Doing Business in the European Union series of reports being produced by the World Bank Group at the request of and funded by the European Commission, Directorate-General for Regional and Urban Policy.
[4] Four of the five areas (i.e. with the exception of Starting a Business) include a fourth category, measuring qualitative aspects of the laws and regulations.
[5] The description of the case studies is available here: https://www.doingbusiness.org/en/methodology.
[6] These are Bulgaria, Hungary and Romania (2016); Croatia, Czech Republic, Portugal and Slovakia (2018); Greece, Italy and Ireland (2019); Austria, Belgium and the Netherlands (2020). All data and related reports are available at: https://www.doingbusiness.org/eu.
[7] Available at https://www.doingbusiness.org/content/dam/doingBusiness/media/Subnational-Reports/DB13-Italy.pdf. The 2012 report is the result of the collaboration of the Government of the Italian Republic’s Department for Planning and Coordination of Economic Policy of the Presidency of the Council of Ministers (DIPE) with the Global Indicators and Analysis Department of the World Bank Group.
[8] These are Bari, Bologna, Cagliari, Milan, Naples, Padua, Palermo, Rome and Turin.
[9] Starting a business, dealing with construction permits, registering property and enforcing contracts; all of them measured in terms of costs, time, number of procedures.
[10] All excluding the cost for dealing with construction permits, where a slight increase of the average cost has been recorded, the time to register a property, which increased from 18.5 to 22 days, and the cost for registering a property, which remain stable (4.4% of the property value).
[11] Beyond the three-year strategic plan all Courts must prepare, Milan also produces an annual management plan. The latter is based on projections from the previous year’s Court performance reports. This allows for quick reallocation of judges to sections that need them most.
[12] Honorary judges are fixed-term judges, appointed on three-years contracts, who did not pass through the ordinary concours (“concorso in magistratura”). Their role is supposed to be limited to auxiliary tasks, but tribunals have wide autonomy in deciding how to manage them (they can decide contract claims until a certain threshold, support the gathering evidence process, etc.).
[13] Equal to 13.8% of income per capita.
[14] For example, Court sections solely dedicated to commercial disputes.