Reconstruction Aid, Public Infrastructure, and Economic Development: The Case of the Marshall Plan in Italy
98 Pages Posted: 17 Apr 2018 Last revised: 30 Dec 2020
Date Written: December 30, 2019
The Marshall Plan (1948–1952) was the largest aid transfer in history. This paper estimates its effects on Italy’s postwar local economic development. It exploits plausibly exogenous differences between Italian provinces in the value of reconstruction grants they received. Provinces that could modernize a larger portion of their infrastructure stock experienced higher increases in agricultural production, especially for perishable crops that benefited the most from an efficient transportation system. In the same provinces, we observe larger investments in labor-saving machines, the entry of more firms into the industrial sector, and a larger expansion of the industrial and service workforce.
Keywords: international aid, economic growth, reconstruction grants, Marshall Plan, innovation
JEL Classification: H84, N34, N44, O12, O33
Suggested Citation: Suggested Citation