The growing constraints on public expenditure imposed by the process of European Monetary
Union are increasingly shifting the attention of policymakers to the quality of industrial policy.
A recent address of Italian political economy emphasises the role of the so ca/led "patto d'area"
(a package of fax allowances, soft loans and services provided only to firms located in Marshallian
Industrial Districts or aimed at "reproducing" them in new underdeveloped areas). The implicit
assumption is that industrial policy is more effective on "fertile grounds" in which
infrastructures and cooperation among firms are of good quality. Does past experience support this
assumption and tell us that subsidies are more effective when provided in district than in non
district areas? The present paper explores this hypothesis on a dataset of around 2000 firms
showing that district subsidised firms seem to obtain better borrowing terms and, in the medium
run, a relative improvement of their return on investment with respect to the control sample.
