Land Inequality and Long-Run Growth: Evidence from Italy

This paper explores the role of landownership distribution in shaping the Italian post-WWII long-run growth experience (1951-2001). By exploiting an extraordinarily high-quality sub-national dataset, we find a strong and robust negative relationship between private landownership inequality and different measures of economic development and structural change during the Economic Miracle. Our results show that a relatively egalitarian agrarian milieu was conducive to the most successful growth model in post-WWII Italy: the ‘industrial districts’, the flexible network of small and medium-sized enterprises whose origins can be traced back to the 1950s. Widespread access to property and family farming was key to accelerating structural transformation. We find the effect of land inequality to be driven by the compression of the resources available to the lower-middle rural class. The intensity of sharecropping and rent-paying tenancy among non-owning farmers is also associated with higher growth, mitigating the growth-depressing effects of land inequality. The growth-enhancing effects of access to property are limited by minimum asset value levels and fade above a certain threshold, consistent with the existence of credit constraints and poverty traps that shape structural transformation in the long run.