In this paper, we show that the regional finance-growth nexus in Italy is
robust to a series of innovations with respect to the existing literature on the topic.
We use finer measures of economic and financial development, as well as instruments
with a deeper economic content. We rely on state-of-the-art cross-sectional and panel
estimation methods, and we offer a thorough investigation of the nonlinearities in
the relation between finance and growth. Our results show that, while local financial
development is a key factor for economic growth, in regions with inefficient courts
more credit might translate into reduced growth due to opportunistic behaviour and
the consequent misallocation of funds.