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On the many failures of (southern) Italy to catch up

Regional income inequality in Italy in the long run (1871–2001). Patterns and determinants

by

Emanuele FELICE (claudioemanuele.felice@uab.cat) Departament d’Economia i d’Història Econòmica, Universitat Autònoma de Barcelona

ABSTRACT

The chapter presents up-to-date estimates of Italy’s regional GDP, with the present borders, in ten-year benchmarks from 1871 to 2001, and proposes a new interpretative hypothesis based on long-lasting socio-institutional differences. The inverted U-shape of income inequality is confirmed: rising divergence until the midtwentieth century, then convergence. However, the latter was limited to the centrenorth: Italy was divided into three parts by the time regional inequality peaked, in 1951, and appears to have been split into two halves by 2001. As a consequence of the falling back of the south, from 1871 to 2001 we record s-divergence across Italy’s regions, i.e. an increase in dispersion, and sluggish ß-convergence. Geographical factors and the market size played a minor role: against them are both the evidence that most of the differences in GDP are due to employment rather than to productivity and the observed GDP patterns of many regions. The gradual converging of regional GDPs towards two equilibria instead follows social and institutional differences – in the political and economic institutions and in the levels of human and social capital – which originated in pre-unification states and did not die (but in part even increased) in postunification Italy.

URL:  http://d.repec.org/n?u=RePEc:aub:uhewps:2013_08&r=his

Review by Anna Missiaia

This paper was distributed by NEP-HIS on 2013-12-29. The author, Emanuele Felice, engages  with the mother of all research questions in the economic history of post-Unification Italy, which is “why did the south fall behind?”. The large and widening economic gap between the north and south of Italy remains one of the “big topics” in Italian economic history and one upon which consensus is far from being reached. The paper by Felice aims at providing both new quantitative data to assess this gap and a discussion on what caused and, equally important, what did not cause the formation and persistence of the north/south divide. 

Emanuele Felice

Emanuele Felice

Let us start with the quantitative assessment. Felice provides new estimates of regional GDP at present borders. Given the long-run perspective adopted, it is necessary to make sure that we are comparing the same regions through time. This is not straightforward for Italy as it experienced several changes in its borders between 1871 and 2001. Felice collected detailed data from foreign (mostly Austrian) sources on territories that eventually become part of northern Italy. This data enables him to produce regional GDP per capita estimates for 10 year benchmarks from 1871 to 2001.

Felice then measures convergence and divergence across regions. The bottom line is that Italian regions diverged during most of the period under study. This divergence exacerbated the most between World War I (WWI) and the late 1950s. Then during the so called “Economic Miracle” of the 1960s, Italian regions experienced a degree of convergence. This convergence took place during a period of very high economic growth in the north and Felice attributed this convergence to the heavy subsidising of the southern economy. Felice also observes that while the south failed to catch up with the rich north, the northeast and centre succeeded in the task, reaching similar GDP per capita levels to those of the original Industrial Triangle towards the end of the 20th century. 

After the number crunching, Felice moves on to tackle the determinants of the income inequality. Following the path of a debate almost as old as Italy, he focuses on some well known hypothesis. The first one is that the south had a geographical disadvantage either in terms of factor endowment or market access. Felice discards the first hypothesis noting that differences between the north and south were not as marked and that the macro-areas were more different within than between them. Are a result the endowment argument is not a good candidate to explain the north-south divide. On market access, Felice notes that the south had a fairly high access to markets in the period before WWI compared to the north and the situation reversed gradually. Also, after WWI regions with a quite low access to markets (Trentino Alto-Adige and Valle d’Aosta) managed to reach high levels of GDP and regions in the south with a good access to markets performed poorly in GDP growth. 

Trentino Alto-Adig

After excluding geographical factors, Felice discusses the human element to explain divergence. He looks at human capital, social capital and institutions. At the time of unification, the south was lagging behind in both human and social capital (for a more detailed discussion and some numbers see Felice (2012)). Felice’s thesis is that economic development in the south was highly affected by its low human capital until WWII. In spite of the catch up in literacy rates after WWII, measures of social capital show that the south has never reached the level of the north. The persistence of the gap has therefore to be attributed to persistence of low levels of social capital that allowed the consolidation of poor institutional settings as well as the flourishing of organized crime.  

Reading Felice’s paper, one’s impression is that the author managed to convey several years of quantitative research into a nice narrative on how the south fell behind. He uses a mix of hard data and qualitative reasoning to guide the reader through. In particular, he takes timing of turning points (i.e in market access, state intervention or catch up in literacy rates) to explain how different elements could or could not explain the divide. He also uses the case of the northeastern regions to explain how path dependence can be overcome (the northeast had very low levels of human capital at the time of unification but managed to catch up with the rest of the north).  

For the Italian readers, Emanuele Felice, 2014, "Perche' il Sud e' rimasto indietro", Il Mulino, Bologna.

For the Italian readers, Emanuele Felice, 2014, “Perche’ il Sud e’ rimasto indietro”, Il Mulino, Bologna.

To conclude, it is often the case that this narrative argues that the south was not disadvantaged in all the factors and that different periods were driving economic growth in the country. However, it seems like it was advantaged in a given factor of growth only when that factor was not important. For example, it had a good market access before WWII, when human capital was more important; it had cough up in terms of human capital after WWII but at that time social capital started being more important. The picture that emerges from this work is that the south suffered from a mix of poor starting conditions, bad timing and unfortunate development strategies that trapped it into the gap that we still observe today.

 

References

Emanuele Felice, 2012. Regional convergence in Italy, 1891–2001: testing human and social capital, Cliometrica, Journal of Historical Economics and Econometric History, Association Française de Cliométrie (AFC), vol. 6(3), pages 267-306, October.

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3 thoughts on “On the many failures of (southern) Italy to catch up

  1. bbatiz

    [This comment was originally placed in "About" and has been reproduced verbatim]

    Emanuele Felice’s work on the North and the Mezzogiorno looks splendid. But I worry. I have long been suspicious of a certain tragic fatalism in (northerners’) talk about The Problem of the South. Carlo Levi would explain to his uncomprehending friends in the 1930s and 1940s eager to use the State to solve “the problem of the South” in Italy, “The State, I said, cannot solve the problem of the South, because the problem which we call by this name is none other than the problem of the State itself.” Rome, not Messina. Among outsiders it comes through in Edward Banfield’s work long ago, and especially in Robert Putnam’s.

    Sicilia and Calabria are now much, much better off than they were a century ago. If the South was a separate country (now, don’t start that!) it would rank among the pretty well-to-do, wouldn’t it? Anyway, the centuries-old insistence on comparing the South with the North is based on . . . what exactly? Both regions have grown smartly since 1950. Anyone who goes to, say, Catania feels she is in a First-World city (she did not feel this in 1959). The deficiencies in human capital were palpable on the old days, of course, but not, it seems, deeply cultural, or else southern Italians in the USA and Brazil and so forth would not have been so successful (one can make the same point about overseas Chinese, Parsis, Old Believers, eccetera). Italian-Americans a generation ago ranked third in educational attainments, after Jews and the Irish. Look at the number of prominent Americans with names ending in vowels. Most of them have grandparents from the South.

    I know that the South is supposed to be a great example of Why Institutions Matter—that was Putnam’s theme. But if so, why has it grown at all? Oh, yes: subsidies from the North. But that can’t account for rising improvements, can it?

    Deirdre McCloskey

    http://deirdremccloskey.org

    Reply
    1. Emanuele Felice

      Thanks, Deirdre, for your comment (and of course thanks Anna, for your nice review).
      The big question looms, indeed: what would have been of Southern Italy, if it was to live on as an independent state? Of course, we don’t know the answer (not least, because the entire European history would probably have been different). But we know what happened to Southern Italy, as a part of Italy, in comparison with other countries; it performed poorly, worse than Spain, more or less like Portugal or Greece. Conversely, the Centre-North ranks among the big winners in modern economic history, even after allowing for Italy’s recent economic decline.
      This is true not only for income, but also for more comprehensive indicators as the Human development index, at least according to the estimates I have produced together with Michelangelo Vasta: http://www.h-economica.uab.es/wps/2012_10.pdf

      Catania… what a lovely city, it’s true. And it looks great. But what about Naples? What about Palermo? Taranto?? And many others… that’s why we need of aggregate indices :)

      Reply
  2. Emanuele Felice

    Deirdre, I’m sorry, I forgot to comment about Carlo Levi (one of my favourite authors!). He was right, in my view: the Italian state also was a problem; and it was so, because it had chosen to be on the side of the ruling elites of Southern Italy (the “Gattopardo”…)

    Reply

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