Administrative Reforms and Urban Development : Lessons from Italian Unification

We study how changes in the political-administrative hierarchy of a country affect urban development. We exploit the 1865 administrative reform occurred in the aftermath of Italian unification as a quasi-natural experiment to assess whether district’s capital cities endowed with supra-municipal administrative functions by law gained a population growth premium compared to similar non-capital cities in the period 1871-1921. We rely on difference-in-differences and event study estimation strategies, and find that district’s capital cities recorded a time-persistent population growth premium. Three main mechanisms explain our results: increases in public employment; increases in manufacturing employment; and development of the infrastructure endowment