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The paper estimates the political connection premium for Italian cities tracked during the second half of the 1900s, when the role of the state in the economy was very widespread. It leverages the peculiar features of the gridlocked political landscape in place between the end of World War II and the fall of the Berlin wall, during which most influential politicians remained in charge for a very long time. We compare connected cities - small areas surrounding birthplaces of both prime ministers and leaders of the parties in power - with very similar, but unconnected municipalities, and find that politically connected cities gained a population premium of 8% over 40 years. When the connection ends, the difference in growth rate fades away. We document that birthplaces of powerful politicians benefited from both infrastructure investments and the location of plants by state-owned enterprises. Not surprisingly, the connection favored industrialization, raised employment and wages, but crowded out private entrepreneurship. Finally, our empirical evidence indicates that agglomeration economies in treated municipalities were not higher, thus suggesting that, if anything, place-based interventions linked to political connections have not been output-enhancing from a nationwide point of view.

The paper estimates the political connection premium for Italian cities tracked during the second half of the 1900s, when the role of the state in the economy was very widespread. It leverages the peculiar features of the gridlocked political landscape in place between the end of World War II and the fall of the Berlin wall, during which most influential politicians remained in charge for a very long time. We compare connected cities - small areas surrounding birthplaces of both prime ministers and leaders of the parties in power - with very similar, but unconnected municipalities, and find that politically connected cities gained a population premium of 8% over 40 years. When the connection ends, the difference in growth rate fades away. We document that birthplaces of powerful politicians benefited from both infrastructure investments and the location of plants by state-owned enterprises. Not surprisingly, the connection favored industrialization, raised employment and wages, but crowded out private entrepreneurship. Finally, our empirical evidence indicates that agglomeration economies in treated municipalities were not higher, thus suggesting that, if anything, place-based interventions linked to political connections have not been output-enhancing from a nationwide point of view.

This paper evaluates a programme of subsidies for Collaborative Industrial Research (co-)funded by the EU Cohesion Policy in Italy mobilising over 1 billion euros. This programme in the 2007-2013 funding cycle was a precursor to some of the key features of Smart Specialisation Strategy (S3) programmes, offering evidence-based insights on potential challenges to the practical application of the S3 approach. The programme was not successful in boosting investments, value added or employment of beneficiary firms. The collaborative dimension of the projects added limited value and a more generous funding level would not have improved effectiveness. However, positive impacts emerged in low-tech sectors.

The paper uses the consolidation of municipalities brought about by the Fascist dictatorship in Italy during the 1920s to gauge the role of the size of local jurisdictions for economic development. It finds that the consolidation was associated with relevant net welfare gains for the communities involved. In particular, the advantages related to the bigger economies of scale made possible in jurisdictions of larger size overwhelmed the costs owing to the higher heterogeneity.