DP17696 From Global to Local: Trade Shocks and Regional Growth in Italy During the First Globalization
Globalization can create winners and losers at the spatial level within national economies. This paper examines the economic impact of international trade on local economies in the case of late nineteenth-century Italy. We combine data on foreign trade at the national level
with census data on manufacturing employment, and with our new estimates of agricultural employment by crop at the provincial level. Crossing this information, we compute two measures of trade exposure at the local level, namely import penetration and export ratio. We then perform a panel analysis to test whether changes in trade exposure explained provincial GDP growth. First, we detect that import penetration of agricultural products was associated with lower growth of Southern provinces. Second, we find that Northern
provinces were more able to benefit from positive export dynamics in the manufacturing sector. The latter finding might stem from a higher degree of mechanization among Northern manufacturing firms. These results suggest that trade exposure could have been a factor contributing to widening the (already existent and growing) North-South gap.