In this paper we study the ability of the 19-th century Italian government to choose profit maximising prices for a multiproduct monopolist. We use very detailed historical data on the tobacco consumption in 62 Italian provinces from 1871 to 1888 to estimate a differentiated product demand system. The demand conditions and the legal environment of the period made this market as close to a textbook monopoly as is practically possible. The government's stated aim for this industry was profit maximisation: since at the time tobacco revenues constituted between 10 and 15 percent of the revenues for the cash-strapped government, the stated aim was very likely the true one. Cost data for the nine products suggest that the government was not wide off the mark: the tobacco prices were ``not far'' from those dictated by the standard monopoly formulae for profit maximisation with interdependent demand functions.
CEPR discussion paper 12907, May 2018 CEPR
Also see: Pro Market, the blog of the Stigler Center at the University of Chicago: Pro Market
Blindfolded by a lack of earlier systematic data, comparative studies of regional developments in historical Italy begin with the formation of the Italian state, in 1861. We use literacy rates reported in post-1861 population censuses combined with the fact that literacy skills were usually achieved during youth to predict regional literacy developments all the way back to 1821. Our analysis informs ongoing debates about the origins and long-run evolution of Italy's north-south divide. By lifting the veil into Italy's pre-unification past, we establish that the north-south literacy gap was substantial already in 1821, grew markedly wider in the first half of the 19th century, only to revert back in 1911 to the 1821 level. Gender gaps in literacy essentially close in the north during 1821-1911, while in the south they registered a secular stagnation. This opens an avenue for investigating a new dimension of the north-south gap largely overlooked in the existing literature.
The research has been presented so far at the University of Groningen (December 2017), AISRe (Ancona, September 2016), National Institute of Statistics (ISTAT, Rome, June 2106), C.MET05 annual meeting (Naples, June 2016), Sapienza University of Rome (April 2016), Department of Economic History of Lund University (Lund, April 2016), Bank of Italy 2015 Economic History Seminars (Rome), 2015 Summer School on Gender Economics and Society (Turin, Italy), and at the 17th World Economic History Congress - August 2015 (Kyoto).
The paper updates the previous version: The Effect of the Italian Unification on the Comparative Regional Development in Literacy, 1821-1911 (CEIS WP no. 392, July 2016)
This study focuses on industrial location in Italy during the period1871-1911, when manufacturing moved from artisanal to factory-based production processes. There is general agreement in the historical and economic literature that factor endowment and domestic market potential represented the main drivers of industrial location. We test the relative importance of the above drivers of location for the various manufacturing sectors using data at the provincial level. Estimation results reveal that the location of capital intensive sectors (such as chemicals, cotton, metalmaking, and paper) was driven by domestic market potential and literacy. Once market potential and literacy are accounted for, the evidence on the effect of water endowment on industrial location is mixed, depending on the manufacturing sector considered.
Previous version: presented at the 36th annual AISRe conference (September 2015). Website of the Italian regional science association: AISRe
Previous version: presented at the 11th EHES conference (September 2015). Website of the conference: EHES 2015
This paper adopts a dynamic spatial panel data model with common factors to explain the non-stationary diffusion process of cigarette consumption across 69 Italian provinces over the period 1877-1913. The CD-test of Pesaran (2015a), the exponent alpha-test of Bailey et al. (2015), the cross-sectionally augmented panel unit root test of Pesaran et al. (2013), and the spatial stability test of Yu et al. (2012) are used to show that both global common factors and local spatial dependence are important drivers of the propagation of cigarette demand over this period and to determine the point at which the hypothesis of stationarity no longer needs to be rejected in favor of a unit root. The direct and indirect effects derived from the coefficient estimates of the model show that cigarettes were a normal good with an income elasticity of 0.4 and a price elasticity -0.4 in the long term. This price elasticity of -0.4 consists of a direct effect of -0.54 in the own region and a spillover effect to other regions of 0.15. This positive spillover effect is in line with previous spatial econometric studies which investigated cigarette demand in the U.S. states over a more recent period.WP version: CEIS WP no. 381, May 2016
This paper investigates regional business cycle co-movements in Austria–Hungary from 1867 to 1913. Economic theory suggests that rising market integration induces sectoral specialisation, resulting in a reduction in the correlation of regional GDP cycles (Krugman effect). However, the synchronisation of business cycles is expected to increase because of the growing inter-linkages among regions led by the adoption of common currency and common economic policies (Frankel and Rose effect). We show that in the case of nineteenth-century Austria-Hungary the specialisation effect, most likely amplified by the stock market crisis of 1873, prevailed during 1867-1890, while the common currency/policy effect prevailed during 1890-1913, when the gold standard was adopted in both Austria and Hungary. However, core and peripheral regions contributed differently to the correlation of business fluctuations.
This is a completely revised version of LSE Economic History Working Paper no. 186 (2014) and CEIS Working Paper no. 312 (2014). The underlying database and the methodologies have been considerably modiﬁed and updated compared to the previous versions. The paper has been presented at the LSE Economic History Graduate Students Seminar (2013), the Frontier Research in Economic and Social History (FRESH) meetings in Warsaw (2013) and Odense (2015), and at the European Historical Economics Society (EHES) conference in London (2013).
Abstract: this paper presents new annual estimates of railway extension in italian provinces at 1913 borders for the period 1839-1913. the main operator of the italian railway network (Ferrovie dello Stato) published in 1911 a unique set of homogeneous historical five year maps illustrating the routes of existing railway lines during 1861-1909. these eleven maps were all scanned and georeferenced in an arcGis-project. the resulting database was integrated with the information available in historical sources. as a second step, to allocate the various sections of railway lines to italian provinces, we used a historical digital map (in arcGis shapefile format) of italian provinces freely available on the sistat section of the istat (italian national institute of statistics) website. the new estimates were systematically checked against those reported at various geographical scale in the historical sources and in the more recent literature.
This paper estimates a conditional beta-convergence model of labor 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 neighboring provinces can explain much of the geographical variability of productivity growth in manufacturing in nineteenth-century Italy.
Research supported by MIUR PRIN (Programmi di Ricerca Scientifica di Rilevante Interesse Nazionale) grant 2010J3LZEN. A previous version of the paper (circulated as "Industrial growth and spatial spillovers in 19th century Italy") has been presented at the annual conference of the Economic History Society (EHS) - March 2015 Telford, (EHS 2015) , at the annual conference of the AISRe (Italian Association of Regional Science), Padua, September 2014 (AISRe 2014 conference) and at the annual conferenze of the SIE (Societa' Italiana degli Economisti), Trento, October 2014 (SIE 2014 conference)
This paper estimates dynamic demand models for tobacco consumption in Italy from 1871 to 2010. The empirical analysis is based on an entirely new dataset. Because the tobacco sector was mostly managed by the State, a rich and detailed historical documentation is available. Price elasticities are estimated both for aggregate tobacco consumption and its four major components (cigars, cigarettes, cut tobacco, and snuff) for three separate sub-periods: 1871-1913, 1919-1939, and 1946-2010. Elasticities consistently belong to a narrow set. We discuss the public policy implications of a seemingly iso-elastic tobacco demand function.
We thank the participants of the XXVIII Annual Conference of the Italian Society for Public Economics, Lecce, September 2016, and of the 57th Annual Meeting of the Italian Economic Society (SIE), Milan, October 2016. We have benefitted from the feedback provided by seminar participants at the Department of Economic Analysis, University of Valencia (ES). We also thank two anonymous reviewers for their useful comments and the Amministrazione autonoma dei monopoli di Stato (AAMS) and the Ufficio Studi of the Federazione Italiana Tabaccai (FIT) for supplying annual data of tobacco consumption for the period 1983-2010.
This paper presents up-to-date annual statistical reconstructions of industrial value added for the period 1861-1913 for Italy's regions (NUTS 2 units). Corresponding provincial (NUTS 3 units) estimates for census years 1871, 1881, 1901, and 1911 are also provided. The present work aims to contribute in making the Italian case a major point of interest to regional economists and social scientists analyzing the long-term evolution of spatial economic aggregates.
In this paper we examine the dynamics of technical change in the Italian locomotive industry in the period 1850-1913. From an historical point of view, the case of the Italian locomotive industry presents a major point of interest: it was one of the few relatively sophisticated "high-tech" industries in which Italy, a latecomer country, was able to firmly set foot before 1913. Using technical data on the performance of different vintages of locomotives, we construct a new aggregate index of technical change for the industry. Overall the most successful phase for the Italian locomotive industry seems to be period 1895-1913 characterized by a very rapid technical progress and by the effective consolidation of the technological capabilities in this area of two major firms: Breda and Ansaldo. Our re-assessment reveals the critical role of non-tariff trade barriers in the development of this industry. (get pdf - CEIS web site) (get pdf - ssrn)
A preliminary version of the paper ("Was Italy a backward country ?.....") was presented at the Bank of Italy, October 2013 (link to the manuscript)
LEM working paper (Sant'Anna School of Advanced Studies) - Dec 2014 - (LEM WP)
This paper investigates the patterns of sectoral specialisation in Italian provinces over half a century following the Unification of the country. To this end we propose a multivariate graphical technique named dynamic specialisation biplots. In 1871 specialisation vocations toward the different manufacturing sectors were limited in size and no clear geographical path emerged. A regional specialisation divide resulted clearly in 1911. In 1871 as in 1911 the foodstuffs, the textile, and the engineering sectors represented the three pillars delimiting the arena of the specialisation race. Within that arena, sharp changes in the directions of specialisation trajectories characterise a group of selected Northern provinces, largely attracted by the textile sector from the 1880s and from the engineering sector in the pre-War decade. Within region homogeneity and smooth specialisation trajectories are instead representative of most of the remaining provinces. Among them, Southern provinces exhibit specialisation paths revealing that little more than a composition effect occurred among manufacturing sectors.
This paper presents statistical reconstructions of industrial labor force in post-Unification Italy. The estimates are based on the population censuses and refer to the years 1871, 1881, 1901, and 1911, separating males and females. The figures are presented for each of Italy's 69 provinces. Industry is defined, as it is customary in the literature, so to include four major components: mining, manufacturing, constructions, and utilities. Manufacturing is in turn divided into 12 sectors. Some of the limits of population censuses, including above all their questionable representation of the labor force in the textile sector, are briefly recalled. The paper focuses then on a possible use of the proposed labor force estimates. It is in particular shown that, despite their known limits, population censuses represent a useful historical source to obtain legitimate estimates of provincial value added for Italy's industry. The present contribution - that aims at stimulating the quantitative debate on Italy's industry and industrialization at the local level - ends by presenting possible directions for future research.
This paper studies the demand for tobacco products in post-unification Italy. We construct a very detailed panel dataset of yearly consumption in the 69 Italian provinces from 1871 to 1913, and use it to estimate the demand for tobacco products. We find support for the Becker and Murphy (1988) rational addiction model. We also find that, in the period considered, tobacco was a normal good in Italy: aggregate tobacco consumption increased with income. Subsequently, we consider separately the four types of products which aggregate tobacco comprises (fine-cut tobacco, snuff, cigars, and cigarettes), and tentatively suggest that habit formation was a stronger factor on the persistence of consumption than physical addiction. The paper ends by showing that the introduction of the Bonsack machine in the early 1890s did not coincide with changes in the structure of the demand for tobacco, suggesting cost driven technological change.
This article presents estimates of industrial production in post-Unification Italy’s 69 provinces in the census years 1871, 1881, 1901, and 1911. Initially industry was largely artisanal, and located in the former political capitals; but even then the waterfalls of the subalpine north-west attracted what factory industry there was. Contrary to widespread opinion, in the aftermath of Unification the industrial and overall growth leaders were actually in the south, where selected provinces reaped the gains from the freer foreign trade, and infrastructure investment, that accompanied the loss of independence. Over the later nineteenth century industry concentrated into the ‘industrial triangle’; but even there industrialization remained sharply local, and excluded the right bank of the upper Po. The early twentieth century, in turn, brought a measure of industrial diffusion—to the centre/north-east, where it was tied to the production of perishables on recently improved land—and concentration within the north-western triangle itself, into its major cities, as progress in energy transmission effectively moved the waterfalls into the plains.
- abstract in english (here)
Extract from page 257 of Meridiana, 73-74, 2012:
Durante le celebrazioni del centocinquantenario dell'Unità nazionale i temi del dualismo e del divario Nord-Sud nel modello di sviluppo italiano, nonché quelli relativi agli effetti economici del processo di unificazione, hanno trovato una nuova centralità nel dibattito pubblico e in molte pubblicazioni scientifiche. Dopo anni di assenza il Mezzogiorno e i suoi rapporti con il resto del paese tornano a essere oggetto di discussione. Sulla scia dell’articolo di Salvatore Lupo pubblicato sul numero 69 e intitolato L’economia del Mezzogiorno postunitario. Ancora su dualismo e sviluppo, «Meridiana» inaugura una rubrica che si propone di affrontare in modo critico tematiche di questo tipo, accogliendo riflessioni e analisi relative alle problematiche territoriali dello sviluppo italiano o su altre questioni rilevanti, non necessariamente allineate alle categorie interpretative elaborate dalla rivista fin dalla fine degli anni ottanta. La redazione, dunque, ringrazia Carlo Ciccarelli, Stefano Fenoaltea e Vera Zamagni per aver accettato di partecipare a questa iniziativa editoriale.
In this paper we study the ability of a 19-th century Italian government to choose profit maximising prices for a multiproduct monopolist. We use very detailed historical data on the tobacco consumption in 69 Italian provinces from 1871 to 1888 to estimate a nine vertically and horizontally differentiated product demand system. The demand conditions and the legal environment of the period made this market as close to a textbook monopoly as is practically possible. The government undertook two major price reviews, and a minor one, the stated aim of which was profit maximisation: since at the time tobacco revenues constituted a proportion between 10 and 15 of the revenues for the cash-strapped government, the stated aim was very likely the true one. Cost data for the nine products suggest that the price reform was not wide off the mark: the new prices were ``not far'' from those dictated by the standard monopoly formulae for profit maximisation with interdependent demand (eg Tirole 1988 p 70).
PRESENTED AT: European Association for Research in Industrial Economics, 39th Annual Conference, 2 - 4 September 2012, Rome link
This paper provides an historical account of the consumption of manufactured tobacco in post-Unification Italy. The main phases of the monopoly are first reviewed. National and regional time series estimates are then presented for the years 1871-1913. At the national level the new figures document a long-term reduction in per-capita consumption and a long-term increase in real per-capita spending. Per-capita real spending on tobacco followed rather closely the familiar Kuznets cycle with upper turning points in the mid-1870s, 1887, and, at an unprecedented level, in the pre-WWI years. The new estimates provide additional support to the “optimistic view” of the much debated “crisis” of the 1880s. The longitudinal features of the new regional estimates are also exploited. A standard myopic model of tobacco consumption is considered and tentative estimates of both short and long run income and price elasticities are presented. The paper ends by presenting possible directions for future research.
This paper presents the first annual estimates for the rail-guided vehicles industry in post-Unification Italy. Nationally, maintenance was naturally trend-dominated, while new construction followed a Kuznets cycle; overall, maintenance exceeded new construction, while freight cars represented the largest component of the latter. The limited production of locomotives over the initial decades seems tied to high raw material costs rather than to technical inadequacy. Regionally, new construction was concentrated in the industrial triangle, and in Campania; maintenance was more widely diffused, as repair work tended to follow local traffic, but it too was largely absent from the swath of mostly Southern regions without major urban centers (emerald)
This paper uses time-series evidence on construction movements to examine the convergence of regional business cycles in the decades that followed Italy’s unification. The aggregate series point to cyclical convergence, but a sector-level analysis traces this result to the decline in differentiated “regional-policy” shocks. The regional market cycles diverged, as regions specialized in different sectors of production; market-cycle convergence is observed only within the “industrial triangle,” the regions of which also developed different specializations. This suggests that the balance between growing interdependence and growing differentiation is not general, as the current literature presumes, but specialization-specific.