The roots of a dual equilibrium: GDP, productivity and structural change in the Italian regions in the long-run ( ) Emanuele Felice Università “G. D’Annunzio” Chieti-Pescara Tredicesimo Workshop c.MET05 Ricerca economica e politiche. Studi, analisi e progetti per lo sviluppo economico e sociale. June 15, 2016 Università ̀ degli Studi di Napoli "L’Orientale”

EU regions eligible for cohesion funds,

Italy ’ s regional inequality: Estimates GDP ( ) Felice 2005a, Rivista di Storia Economica (1938, 1951) Felice 2005b, Rivista di Storia Economica (1891, 1911) Felice 2010, Journal of Modern Italian Studies ( ) Felice 2011, Economic History Review ( ) Felice-Vecchi 2015, Journal of Interdisciplinary History (1871, 1931) Indirect estimates: Geary and Stark methodology High sectoral detail ( activities) Direct data Federico agriculture, Ciccarelli-Fenoaltea for part of industry Productivity, Employment ( ) Felice 2010, Journal of Modern Italian Studies ( ) Felice 2011, Economic History Review European Project (Rosés, Wolf) From historical to present borders : Felice 2015, in J. R. Rosés and N. Wolf (eds.), «The Economic Development of Europe’s Regions. A Quantitative History Since 1900», Routledge (book chapter)

The changes in Italy’s regions (1871-today)

Table 1. The relative per capita GDP of the Italian regions (Italy =1) Piedmont Aosta Valley Liguria Lombardy Trentino-Alto A Veneto Friuli-Venezia G Emilia-Romagna Tuscany The Marches Umbria Latium Abruzzi Molise Campania Apulia Basilicata Calabria Sicily Sardinia

The relative per capita GDP of the Italian regions, (Italy = 1)

Table 2. The share of Italian regions in Italian GDP, (per cent) Piedmont Liguria Lombardy Veneto Emilia-Romagna Tuscany Latium Campania Apulia Calabria Sicily Sardinia North-West North-East & Centre South and islands Centre-North

The literature on the North-South divide 1) at the time of Unification (1861) the North-Central regions were already more advanced Fortunato… Cafagna, Zamagni North-West was a natural candidate for industrialization geographical position, natural endowments, human and social capital 2) The South was exploited by the North Nitti, Gramsci… Marxists, Romeo Blocco agrario-industriale the North-South divide emerged mostly in the first decades following Unification 3) Southern Italy a bit more backward, but highly diversified Imes, Meridiana from the 1980s… new estimates: Federico, Fenoaltea, Felice Divergence took place in the interwar years

Dual development 1) Moderate divergence (1871 – 1911) 2) Great divergence (1911–1951) 3) General convergence (1951–1971) 4) Convergence in the Centre-North, or a tale of two Italies (1971–2001)

The determinants of GDP per capita Y/P = Y/L * L/P Productivity (GDP per worker) Activity rates (workers per capita)

Beta and sigma convergence in per capita GDP standardized beta is

Beta and sigma convergence in per worker GDP standardized beta is

Beta and sigma convergence in the activity rates standardized beta is

The periodization of regional inequality in Italy Moderate divergence (1871–1911) Great divergence (1911–1951) General convergence (1951–1971) Convergence in the Centre-North, or a tale of two Italies (1971–2011)

The liberal age ( ): beta convergence in per capita and per worker GDP standardized beta is for per capita GDP, for per worker GDP

The interwar years ( ): beta convergence in per capita and per worker GDP standardized beta is for per capita GDP, for per worker GDP.

The golden age ( ): beta convergence in per capita and per worker GDP standardized beta is for per capita GDP, for per worker GDP

A tale of two Italies ( ): beta convergence in per capita and per worker GDP standardized beta is for per capita GDP, for per worker GDP

Explanations: from human to social capital Differences in employment rate and between sector productivity (neoclassical trade theory) Rather than differences in within-sector productivity (NEG) as if convergence in factor endowments (via decreasing returns in the production function) was prevented by conditioning variables human capital in the first and the second industrial revolution ( ) social capital in the post-fordist age The convergence of the economic miracle was an exception due to massive State intervention

Other explanations: Migration… Migration Should favour convergence grande emigrazione in the liberal age No migration in the interwar years Interregional migration in the 1950s and 1960 But at that time most of convergence was in industry and industrial productivity

Other explanations: … Regional policies ‘Cassa per il Mezzogiorno’, created in 1950 a wide range of infrastructural works – roads, aqueducts and others During the 1960s it concentrated on the industrial sector heavy industries with high capital/labour ratios This can explain much of the South ’ s convergence Yet the Cassa did not create the conditions for autonomous development 1970s crisis: collapse of the new heavy industries in the South regional policy redirected towards unproductive expenditures And it may have even favoured organized crime

Why southern Italy is backward? An interpretation

The North-South socio-institutional divide around Unification Strong differences in infrastructures and in the pre-condition for growth railways, roads, credit system, human capital Institutions (liberal versus absolutist) Higher inequality in the South between the Rich and the Poor = Higher Pauperism Mild differences in GDP per capita (but Italy as a whole still was a backward country) Strong differences in social indicators Life expectancy, poverty, literacy Strong differences in social capital (possibly, as a consequence of higher inequality, poor education, and the failed State)

After Unification: social and institutional differences extractive versus inclusive institutions and, therefore, in the tuling elites and in the economic policies Political institutions Formally the same from Unification (1861) until the 1970s, but (informally) they worked differently Because of different ethics/social capital... Because they were different in the past… Because of a different socio-economic setting... Economic institutions Not even formally the same: * Organized crime (an illegal, but formal, economic institution); * Different agrarian regimes

Thank you! Emanuele Felice Università “G. D’Annunzio” Chieti-Pescara