One market fits all? Market access and the origins of the Italian north–south divide

Italy’s economic development since its unification in 1861 has been characterized by extensive regional inequality. Northern regions were the frontrunners of modern industrialization in the late 19th century, while southern regions never closed the gap. New Economic Geography (NEG) proposes market access as the main driver of regional income differentials. But is its effect homogeneous across regions? The NEG hypothesis is here for the first time considered for the north and the south of Italy separately in the period 1871–1911. Following previous work by the author, both domestic and total market potentials are taken into account as possible drivers of regional gross domestic product (GDP) per capita. The results differ for the two macro-areas: in the south, both market potentials have a strong role in determining the levels of GDP per capita, but they do not affect the growth rates from period to period; and in the north, only domestic market potential is significant in both levels and growth rates. These results point to different dynamics at the sub-national level that should be further qualified by extending the analysis from the NUTS-2 to the NUTS-3 level. The policy implication is that market-oriented measures might not be effective for the most disadvantaged regions before other prerequisites for growth are achieved