2015/18 | LEM Working Paper Series | |
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Where Do We Go From Here? Market Access and Regional Development in Italy (1871–1911) |
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Anna Missiaia |
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Keywords | ||
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Economic Geography; Economic History of Italy; Market Potential
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JEL Classifications | ||
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N33, N73, N93, O18, R11
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Abstract | ||
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Italy has been characterized, throughout its history as a unified
country, by large regional differentials in the levels of income,
industrialization and socio-economic development. This paper aims at
testing the New Economic Geography hypothesis on the role of market
access in explaining these regional differentials. We first quantify
market access of the Italian regions for benchmark years from 1871 to
1911 following Harris (1954). We then use these estimates to study the
causal link between GDP per capita and market potential following Head
and Mayer (2011). The main result of this paper is that only domestic
market potential, which represents the home market, shows a
“traditional” North-South divide. When international markets are
introduced, the South does not appear to lag behind. Regression
analysis confirms that market potential is a strong determinant of GDP
per capita only in its domestic formulation. This suggests that the
home market in this period mattered far more for growth than the
international markets, casting new light on one of the classical
explanations to the North-South divide.
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