Extractive states: The case of the Italian unification

Abstract

Despite the huge evidence documenting the adverse impact of extractive policies, we still lack a framework that identifies their determinants. Here, we lay out a two-region, two-social class model for thinking about this issue, and we exploit its implications to propose a novel account of the present-day economic divide between North and South of Italy. In contrast with the extant literature, we document that its opening is the result of the region-specific policies selected between 1861 and 1911 by the elite of the Kingdom of Sardinia, which annexed the rest of Italy in 1861. To elaborate, pre-unitary regional revenues from land property taxes per capita and railway diffusion are only driven by the contemporaneous region's farming productivity but not by the region's political relevance for the Kingdom of Sardinia's elite, whereas the opposite is true for the post-unitary ones. Moreover, tax-collection costs, the regional political relevance, and tax distortions shaped the growing North-South gap in post-unitary development, culture, and literacy. Crucially, our framework clarifies the incentives of dominating groups in other political and economic unions, e.g., post-Civil War USA and EU.

The origins of the state: technology, cooperation and institutions

“…Second, complementary skills might induce cooperation even without division of power and, possibly, strong protection of the nonelites' property if joint investment activities are sufficiently profitable. These conclusions disagree with Acemoglu and Robinson's (2012) caution that, even if developed, autocratic regimes must be inefficient, and they are consistent with recent empirical results on the insignificant long-run economic effect of a more inclusive political process (de Oliveira and Guerriero, 2018;Guerriero, 2020). To elaborate, these contributions show that more inclusive political institutions can favor an otherwise unfeasible inter-group cooperation in the short run, but might become irrelevant, if not detrimental, when social and/or technological innovations deprive investment of its role and if not accompanied by a forceful culture of cooperation (Boranbay and Guerriero, 2019).…”

Internal Borders and Population Geography in the Unification of Italy

“…Out of the literature on the Italian economy in the long run have emerged numerous hypotheses about factors holding back development. Recent contributions, which typically adopt a regional perspective, have focused on human capital (Ciccarelli and Weisdorf 2019;Federico et al 2021;Postigliola and Rota 2021); social capital (Cappelli 2017;Guiso, Sapienza, and Zingales 2016;Mariella 2022); institutions (Federico and Dincecco 2021;de Oliveira and Guerriero 2018;Di Martino, Felice, and Vasta 2020); and natural resources and geography (Malanima 2016;Bardini 1997;A'Hearn and Venables 2013). Here our focus is on an older concern, one that loomed especially large in the minds of contemporaries: the problem of market fragmentation.…”

Endogenous Institutions and Economic Outcomes

“…). The very unequal achievements of the central state in northern and southern Italy, despite more than 150 years of unification, constitute a glaring example (de Oliveira and Guerriero ). Finally, by favouring local interests, inclusive political institutions might have eased, in the early modern era, fiscal fragmentation and jurisdictional obstacles to trade (Grafe ).…”