Reconstruction Aid, Public Infrastructure, and Economic Development

70 Pages Posted: 17 Apr 2018 Last revised: 8 Feb 2019

See all articles by Nicola Bianchi

Nicola Bianchi

Northwestern University - Kellogg School of Management; National Bureau of Economic Research (NBER)

Michela Giorcelli

University of California - Los Angeles

Date Written: February 5, 2019

Abstract

The Marshall Plan (1948–1952), a U.S. aid program whose goal was to help Europe recover from WWII, has been the largest simultaneous aid transfer in history. This paper estimates its effects on the postwar economic recovery in Italy, the third largest beneficiary. It exploits plausibly exogenous differences between Italian provinces in the amount of reconstruction grants and, therefore, the share of new public infrastructure—mainly roads and railways—built through the Marshall Plan. 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. Agricultural firms in these areas also invested more in motorized machines, which decreased demand for manual labor. In the same provinces, we observe more entry of small firms into the industrial sector, as well as 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

Bianchi, Nicola and Giorcelli, Michela, Reconstruction Aid, Public Infrastructure, and Economic Development (February 5, 2019). Available at SSRN: https://ssrn.com/abstract=3153139 or http://dx.doi.org/10.2139/ssrn.3153139

Nicola Bianchi (Contact Author)

Northwestern University - Kellogg School of Management ( email )

2211 Campus Drive
Evanston, IL 60208
United States

HOME PAGE: http://www.bianchinicola.com

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Michela Giorcelli

University of California - Los Angeles ( email )

9262 Bunche Hall
315 Portola Plaza
Los Angeles, CA CA 90024
United States
650-630-9648 (Phone)

HOME PAGE: http://www.giorcellimichela.com

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