Latifundia Revisited. Market Power, Land Inequality and Efficiency in Interwar Italian Agriculture
This paper explores a simple though neglected mechanism linking land inequality and inefficiency: market power. In underdeveloped economies with serious constraints on labour mobility, high ownership concentration will endow landowners with market power in local labour markets. The resulting equilibrium explains many of the often criticised features of pre-war Italian latifundia, without the need to factor in irrational behaviour (the preferred explanation of Italian traditional historians) or social institutions and capital market imperfections (explanations advanced by economists in different contexts). According to the model here explored the main effects of inequality are of a distributive rather than of a productive nature. The market power hypothesis is strongly supported by the available quantitative evidence provided by an unexploited dataset on all local labour markets of Italy at the end of the 1930s.