Sovereignty instability and development

With M. Balestra, G. Cainelli, R. Ganau, M. Pasquato e R. Pierdicca

We study the long-run effect of past sovereignty instability on current economic development at the subnational, local level in Italy. We proxy sovereignty instability through the yearly number of changes in sovereignty occurred in the period 1000–1861, and assess its effects on a 2018 measure of labor productivity defined for Local Labor Markets. We estimate a negative effect of sovereignty instability on current economic development. We propose a simple model for explaining the persistent effect of sovereignty instability, and explain the underlying mechanism in terms of civic capital. Finally, we provide evidence that sovereignty instability has become a relevant factor contributing to explain current economic development differentials only after the French Revolution, and that the negative role played by sovereignty instability has been partially overcome by institutional and administrative continuity.