The dominant view about Italian Industrial Districts (IDs) suggests that firms within IDs finance themselves through internal sources alone. This view, based on Northeastern IDs - on which the mainstream literature concentrates - implicitly denies any potential role played by state subsidies available to small firms within the framework of national and regional industrial policies from the 1950s onwards. This thesis, focusing on a Southern ID, tests whether IDs can also emerge within the context of state intervention, and whether Southern IDs relied heavily on state funding in contrast with North-eastern IDs, which drew on public funds to a much smaller extent. The thesis employs a two-pronged approach, analysing the issue from the perspective of both the lending institutions and the recipient firms. It discusses the development of the 'Extraordinary intervention for the South' - designed to overcome Southern backwardness - and compares it with the national industrial policies. It moves on to provide a detailed breakdown of the extent to which firms in Southern Italy benefited from subsidised loans and grants more than firms in the North-east, where far fewer firms sought subsidies. The importance of subsidies for the recipient companies is studied using two samples of small manufacturing firms, within the Southern ID of Barletta and the North-eastern ID of San Mauro Pascoli. The analysis of the capital structure of the two samples confirms the greater reliance of Southern companies on subsidies, whereas private finance was more important for the North-eastern counterparts. However, subsidies to companies in the North-eastern ID appear to be more effective. The thesis concludes that the received interpretative framework regarding the types of finance used by companies within IDs is severely limited, in that the role of state subsidies cannot be neglected, particularly for Southern IDs, but also for the more prosperous North-eastern IDs.

The first chapter - Crisis? Which Crisis? - constructs a new series of industrial value added at constant (1938) prices for Italy, for the period between 1928 and 1938. The data employed are shown to be better indicators of the dynamic of the Great Depression than those used by Carreras and Felice (2010) and allow to substantially revise the profile of the Crisis. The contraction appears to be more pronounced and persistent, placing the Italian experience more in line with that of other industrialised countries. The second chapter - The Italian Climacteric - presents new estimates of total factor productivity growth for Italy over the Fascist era and compares them with analogous ones for the pre-World War One period and for Germany and Britain. Because of the absence of a fully reliable GDP series, a dual growth accounting framework is employed. This approach permits the incorporation of new data on land rents and of new evidence on the returns to human capital. Results show that during the interwar era Italy experienced a “climacteric", defined as a cessation of TFP growth, which compares poorly with the coeval performance of Britain and Germany. This disappointing result contrasts vividly with what occurred in the late liberal Italy, when TFP grew less quickly than in Germany, but faster than in Britain. The third chapter - A Tale of Two Fascisms - offers the first quantitative assessment of labour productivity dynamics within the Italian industrial sector and of their links with Fascist competition policy. We argue that the institutional context in which Italian firms operated and, in particular, changes in the level of product market competition had a significant effect in determining their productivity performance. By relying on a new dataset and on new labour productivity estimates, we show that the earlier more liberal period of the Fascist era was characterised by a true productivity boom, which ended following the switch to a more interventionist industrial policy. Panel data evidence shows that reductions in the level of competition in the industrial sector were associated with lower productivity growth, while changes in industrial structure were a less significant factor.

What accounts for the differences in the economic performance across Italian regions in the post-Unification period? This thesis seeks to explain the regional patterns of economic development and industrialization in Italy in the period 1871-1911 by applying various Economic Geography models. The first part follows Overman and Puga (2002) and studies the distribution of industrial employment across regions. The aim is to test the effect of regional borders on the distribution of industrial employment. The existence of this border effect, tested through the use of provincial data, suggests that the Italian regions in this period represented meaningful economic entities. By testing the effect of pre-1861 borders we link this result to the persistence of pre-Unification institutional arrangements. The second part follows the methodology by Head and Mayer (2011) and investigates the relationship between economic performance and market access. Here market access is captured through market potential, a measure of the centrality of a region based on GDP and transport costs. The main result is that domestic market potential is a strong determinant of GDP per capita while all the formulations of market potential that include trading partners give more mixed results. The last part seeks to explain the location of industries in Italy in the period 1871–1911. The analytical framework takes into account both the Heckscher-Ohlin (H-O) theory on factor endowment and the New Economic Geography (NEG) theory on access to markets. The methodology used here is based on Midelfart-Knarvik et al. (2000). The location of industries, measured through employment per region per sector, is explained with interactions between characteristics of the regions and characteristics of the sectors, of both H-O and NEG-type. The main findings of this chapter are that endowments, and in particular human capital, were the driving force behind the first Italian industrialization while access to markets had a more limited effect.