Bank-firm relationships and allocative efficiency in Northeastern and Central Italy and in the South

We make two contributions on the extent and impact of relationship banking - based on close and long-lasting bank-firm customer relationships - in the three sub-systems in which Italy may be subdivided. First, we show that relationship banking is more extensive in both sub-systems where small businesses prevail: the fast-growing Northeast and Center (NEC) and the South, the marginal area of dependent development. Second, we demonstrate that relationship banking improves the allocation of credit in the NEC but worsens it in the South. This evidence suggests that relationship banking may be beneficial or detrimental depending on the socio-economic structure. (C) 2000 Elsevier Science B.V. All rights reserved. JEL classification. G21; O16.