The educational roots of persistent territorial disparities: the case of Italy

Almost 160 years on from their political unification, Italian territories display large economic disparities. We exploit different data sources to assess the roots of this heterogeneity at the province level, contending that citizenship skills and their contribution to the quality of political institutions are key sources of inertia and lack of convergence. Eventually, they may explain the increasing divergence displayed lately by data. We contribute to the literature in four ways. Firstly, our results offer support to the idea that remote measures of people’s literacy are a good proxy for the long-lasting effect of institutions and a predictor of current economic performance. Secondly, after controlling for the historical determinants of institutions, our estimates confirm expectations about the role of current and remote measures of institutional quality in explaining per capita GDP at province level. Thirdly, we provide evidence on the role of entrepreneurship as the main mediator of the institutions-development link to GDP at the local level. Finally, we present evidence on the cyclicality of the contribution of institutional quality to economic performance; we show that the role of institutions is quite stable, and that GDP is more responsive to the quality of institutions in good times.