Forced labour in manufacturing and the local industry structure: the case of Italy

Do spatial socioeconomic features influence the demand for forced labour also in places where it is illegal and socially unacceptable? We provide an answer to this question by estimating the effect of the characteristics of the local industry structure on forced labour in manufacturing (FLM hereafter) using Italy as case study. Conceptually, we bridge the literature on forced labour with economic geography to empirically test the effect of local industry specialisation and firm size. Exploiting a novel database of geo-tagged episodes of FLM across Italian Local Labour Market Areas, we find that find that industry specialisation and the share of micro-firms in the industry that specialises a place are key predictors for FLM. Instrumental variable estimates relying on novel data on the geography of Italian firms in 1911 show that results are robust to endogeneity threats. Findings also hold to the inclusion of potential confounding features, like the presence of migrants and institutional quality, and to spatial dependecy tests. Moreover, results support the relevance of addressing the spatial dimension for a thorough understanding of FLM. Overall, this work contributes to the currently scant quantitative evidence on the micro-regional determinants of forced labour in the Global North, which is still relatively unexplored.