Industrial location, market access and economic development: regional patterns in post-unification Italy

Sammanfattning: What accounts for the differences in the economic performance across Italian regions in the post-Unification period? This thesis seeks to explain the regional patterns of economic development and industrialization in Italy in the period 1871-1911 by applying various Economic Geography models. The first part follows Overman and Puga (2002) and studies the distribution of industrial employment across regions. The aim is to test the effect of regional borders on the distribution of industrial employment. The existence of this border effect, tested through the use of provincial data, suggests that the Italian regions in this period represented meaningful economic entities. By testing the effect of pre-1861 borders we link this result to the persistence of pre-Unification institutional arrangements. The second part follows the methodology by Head and Mayer (2011) and investigates the relationship between economic performance and market access. Here market access is captured through market potential, a measure of the centrality of a region based on GDP and transport costs. The main result is that domestic market potential is a strong determinant of GDP per capita while all the formulations of market potential that include trading partners give more mixed results. The last part seeks to explain the location of industries in Italy in the period 1871–1911. The analytical framework takes into account both the Heckscher-Ohlin (H-O) theory on factor endowment and the New Economic Geography (NEG) theory on access to markets. The methodology used here is based on Midelfart-Knarvik et al. (2000). The location of industries, measured through employment per region per sector, is explained with interactions between characteristics of the regions and characteristics of the sectors, of both H-O and NEG-type. The main findings of this chapter are that endowments, and in particular human capital, were the driving force behind the first Italian industrialization while access to markets had a more limited effect.