Early railways and industrial development: Local evidence from Sardinia in 1871–1911

Similarly to other countries, the development of an early national railway network took place in Italy during the second half of the 19th century. Railroads were then regarded as carriers of modernity that could reach isolated areas, expand market potential, and favor the structural transition from an agricultural economy toward an industrial one. Did the newly constructed railways actually have medium-run effects on the development and structure of industrial sectors at the local level? We bring new evidence to the existing literature by looking at the case of Sardinia. According to our estimates, municipalities that received a railway station during the 19th century did not have a significantly higher future probability to host at least one industrial firm, as compared to municipalities without a railway station. However, in those municipalities that received a railway station during the 19th century, specific industrial sub-sectors such as foodstuff and metal processing had higher employment by 1911. Moreover, these industrial sub-sectors tended also to display more firms in those municipalities that received a railway station, although this latter effect is statistically weaker. These outcomes are especially strong in locations having direct access to the main railway line with standard gauge rails, while the effects of secondary narrow gauge lines do not find a similar empirical support. Results are robust to a large set of control variables and district fixed effects and to the use of an instrumental variable based on least-cost paths.