Bank±®rm relationships and allocative eciency in Northeastern and Central Italy and in the South Giovanni Ferri a , Marcello Messori b, * a Department of Economics, University of Bari, Bari, Italy b Department of Economics, University of Rome ``Tor Vergata'', via Isonzo 42, Roma 00198, Italy Abstract We make two contributions on the extent and impact of relationship banking ± based on close and long-lasting bank±®rm customer relationships ± in the three sub-systems in which Italy may be subdivided. First, we show that relationship banking is more ex- tensive 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 bene®cial or detrimental depending on the socio-economic structure. Ó 2000 Elsevier Science B.V. All rights reserved. JEL classi®cation: G21; O16 Keywords: Banking information; Localization; Development 1. Introduction The paper aims to ascertain whether, in Italy, the geographical dierences in productive and socio-economic structures are paralleled by dierences in Journal of Banking & Finance 24 (2000) 1067±1095 www.elsevier.com/locate/econbase * Corresponding author. E-mail address: messori@uniroma2.it (M. Messori). 0378-4266/00/$ - see front matter Ó 2000 Elsevier Science B.V. All rights reserved. PII: S 0 3 7 8 - 4 2 6 6 ( 9 9 ) 0 0 1 1 8 - 1