Universities, local economic productivity, and quality of institutions: Evidence from Italy

An important issue in economic geography is the link between higher education institutions and economic performance at local level. This paper exploits some aspects of the university funding system in Italy to estimate the effects of hosting higher education institutions on local productivity and furthermore tests whether local institutions have a moderating role in this relationship. The findings firstly confirm that university performance positively affects local economies. Secondly, we argue that an important channel linking universities to greater economic activity is the administrative capacity of local governments to create strong social and economic structures.