Regional market integration in Italy during the unification (1832-1882)

The 19th century was a period of great transformations for Italy. Political unification was achieved in 1861 while economic unification was still far off. Ever since, Italian industrialization has been unbalanced, as the pre-existing gap between Northern and Southern economic development has widened. In this context, the creation of the Italian national market has been a highly debated topic. Originally, it was thought that Italian regions did not experience much market integration even after the Unification. This was due to the low complementarity between its regions. However, in recent work, Federico (2007) finds evidence of market integration starting even before 1861. The purpose of the present study is to examine market integration in 19th century Italy within its regional context. The question is whether the Italian market integration observed previously was due to a catch up of some regions in integrating with the international market while others were already integrated or whether the convergence was due to higher integration among Italian regions. Wheat prices will be used as a stand in for overall market integration. The analysis includes descriptive tools such as the mapping of prices and coefficients of variation as well as panel data analysis on the causes of price differentials among city pairs. The results tentatively confirm the hypothesis of the rise of a national market, as price differentials increased more after Unification in the presence of an adjacent foreign market in the city pair .