Abstract

The Baccarini Law railways, constructed in the 1880s and 1890s, first connected many small centers of the Italian interior to the rest of the country. We study their economic impact on the connected municipalities over the period 1901-1991, focusing on population and employment growth. To identify a causal impact of the railways, we instrument for their allocation using a municipality’s electoral alignment with the local member of parliament, in closed elections. We find that the Baccarini Law railways did have a positive economic impact, but only about 60-70 years after they were constructed (in 1951-1991). In this period, the connected municipalities experienced much faster population growth and employment growth in commerce (especially retail commerce and banking & insurance), manufacturing (especially food and beverages), and education and health services. These results indicate that, while not having a growth effect in the short and medium run, the Baccarini Law railways gave the connected municipalities a competitive edge during the post-WWII economic boom