Regional growth with spatial dependence: A case study on early Italian industrialization

Abstract

This paper estimates a conditional β-convergence model of labour productivity growth in Italy's manufacturing industry during 1871–1911, accounting for spatial dependence. The empirical evidence is based on a recent set of data at provincial (NUTS 3) level on manufacturing value added at 1911 prices, and a new set of data on human and social capital, political participation, and infrastructures. By focusing on a country and a time when the agglomeration forces and spillover effects advocated by the new economic geography were only starting to operate, we can investigate a particularly interesting case study. Our results suggest that human capital, a cooperative culture, and initial productivity in neighbouring provinces can explain much of the geographical variability of productivity growth in manufacturing in nineteenth-century Italy.