Internal Migration, Local Development and Structural Change: Evidence from the Italian Golden Age

Internal migration facilitates an efficient allocation of labor within the economy, but are its sending and receiving areas affected differently? We address this question through the lens of Italy during the Golden Age (1950s-1970s), a period of population reshuffling with no parallel in the country’s history. Exploiting detailed spatial data on migratory flows, we can characterize the impact of short- and long-distance migration on economic development and structural change in the provinces of origin and destination. To tackle endogeneity of migration flows, we build on recent advances in the shift-share IVs literature: we interact past interwar government-authorized migrations with employment growth during the Golden Age to estimate exogenous short-distance migrations; origin-destination railway distances with provinces’ employment growth for long-distance ones. We find that short-distance emigration negatively affected origin provinces’ value added per capita mostly through lower business creation and productivity, while it determined even larger productivity gains in destination provinces. Similarly, although short-distance immigration boosted structural change away from agriculture in favor of the industrial sector, emigration curbs it in the provinces of origin, by reducing employment, value added and productivity in industry. We do not find comparably strong results for long-distance flows, which are shown to negatively affect origin provinces mostly through the employment rate, while the effects on productivity are limited; receiving provinces are also not as affected. We attribute the difference between short and long-distance effects to selection by type of migrants, where the most productive ones tend to favor nearby destinations.