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Path Dependence, Institutions and the Density of Economic Activities: Evidence from Italian Cities


  • Marco Percoco

    (Department of Institutional Analysis and Public Management and CERTeT Bocconi University)


In recent years a growing body of literature has begun to consider the possible presence of path dependence in the development processes of countries. This phenomenon has always been recognized in regional and urban studies because the path of development almost naturally follows a history-dependent spatial diffusion influenced by both physical geography and the quality of institutions. In this paper, I consider the case of firm concentration in Italy and its impact on local development. A large and growing literature has argued in favour of persisting effects of past institutions on current outcomes. Hence, in order to identify the impact of firm density on income, I use instruments from the history of a set of Italian cities: namely the presence of a university and status as a free-city state in the Early Middle Ages. I first show that those two variables had an important effect on the process of urban development between 1300 and 1861, together with favourable geographic conditions. Then, when I use these instruments to predict firm density, I find that the elasticity of income to firm density is close to 0.1. This result is interpreted as providing evidence of the historical roots of agglomeration economies in Italy.

Suggested Citation

  • Marco Percoco, 2010. "Path Dependence, Institutions and the Density of Economic Activities: Evidence from Italian Cities," Working Papers 2010.110, Fondazione Eni Enrico Mattei.
  • Handle: RePEc:fem:femwpa:2010.110

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    References listed on IDEAS

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    Cited by:

    1. Bertocchi, Graziella & Bozzano, Monica, 2016. "Women, medieval commerce, and the education gender gap," Journal of Comparative Economics, Elsevier, vol. 44(3), pages 496-521.
    2. Guido Alfani & Marco percoco, 2014. "Plague and long-term development: the lasting effects of the 1629-30 epidemic on the Italian cities," Working Papers 508, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
    3. Marco Percoco, 2013. "Geography, institutions and urban development: Italian cities, 1300–1861," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 50(1), pages 135-152, February.
    4. Torben Dall Schmidt & Peter Sandholt Jensen & Amber Naz, 2014. "New crops, local soils and urbanization: Clover, potatoes and the growth of Danish market towns,1672-1901," Working Papers 0065, European Historical Economics Society (EHES).
    5. repec:mod:depeco:0007 is not listed on IDEAS

    More about this item


    Path dependence; Urban development; Geography; Institutions; Firm density;

    JEL classification:

    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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