Electricity and the Geography of Industrial Development in a Latecomer Country: Preliminary Evidence on Italy, 1901-1911

Italy, a latecomer country to industrialization, faced the hurdles of lacking coal in the age of steam. When the technology for long-distance electricity transmission became available, it invested heavily in hydropower. By 1911, 42.7% of Italy’s installed industrial power came from hydroelectricity. Using methodologies rooted in New Economic Geography (NEG) and factor endowment theories, we analyze the location of industrial activity across Italian provinces during the census years 1901 and 1911. We evaluate the influence of electric power as a distinct factor alongside traditional determinants such as market potential, human capital, and energy intensity. Our approach incorporates new data on GDP, literacy, and energy stocks, enabling a fine-grained analysis at the NUTS-3 level. Dependent variables include provincial shares of industrial employment and GDP, regressed on interactions between industrial and provincial characteristics. Baseline OLS findings highlight the role of electricity in industrial location, with its influence growing markedly between 1901 and 1911. Alternative specifications and instrumental variable techniques confirm these results, underscoring electricity’s transformative role in reducing Italy’s dependence on water-powered manufacturing. These findings align with broader interpretations of electrification’s role in enabling industrial diversification and regional economic development during the Second Industrial Revolution.