Von Thünen south of the Alps: access to markets and interwar Italian agriculture

Abstract

This paper sheds new light on the agricultural side of the Italian regional divide from an econ- omic geography perspective, following a Von Thunen approach. The central hypothesis is that the development of the nonagricultural economy in the Northern cities drove the location of agricultural output and inputs during the interwar years. A new database on Italian agriculture around 1930 fully confirms the key role of access to domestic markets in shaping agricultural activity. Thus, the causes of Southern agriculture falling behind are revealed: it is not very surprising that an agricultural divergence joined an already ongoing industrial divergence during a period in which international markets collapsed. It was the growth of Northern industry that led to the growth of Northern agriculture, and not vice versa. This paper takes an economic geography approach to explore the patterns of Italian interwar agriculture and its role in the long-lasting Italian regional divide. After framing the Southern falling behind, I turn to an explanation of the divergence exclusively based on factor accumu- lation, building upon a neoclassical version of the Von Thunen model of land use. Hence, I introduce a new cross sectional database of Italian agriculture around 1930 at a fine geographi- cal level of disaggregation. Using this database, I first estimate the agricultural total factor productivities (TFP) throughout the country, which suggest that efficiency differences did not drive the Southern agricultural failure during the interwar years. Indeed, econometric results indicate that the geographical allocation of factors of production was shaped by the access to domestic nonagricultural markets, which in turn shaped output and land rents, as predicted by the Von Thunen model. Hence, the initial industrial divergence is causally con- nected with the subsequent agricultural one by a simple demand mechanism: it was the growth of Northern industry that led to the growth of Northern agriculture, and not vice versa.