Transport infrastructure and regional economic development

Lessons from Italy

     Unequal distribution of transport infrastructure is commonly assumed to be the cause of regional disparities, and investment in lacking infrastructures is equally assumed to be an effective tool to foster economic regional development in lagging regions (World Bank 2008). The North and South of Italy constitutes a paradigmatic example of regional disparities that can be traced back centuries ago. Currently, Southern regions of Italy do not reach 70% of the average EU GDP per capita, whereas Northern and Central regions reach 110% or 120% of the EU average (Eurostat, 2013). Nevertheless, regional policies in Italy have pooled “massive infrastructure investment on roads and railways building” (World Bank 2008, 184) since the 1950s, without delivering the expected results. Drawing on the lessons learnt from the Italian regional disparities experience, these lines wonder what are the opportunities and limitations of investment in transport infrastructure as a tool for regional economic development.

High Speed Railway in Italy

      The assumption of unequal transport infrastructures being the cause of regional disparities is grounded in the “modernisation theory”, extending its intellectual roots back to the mid 19^th century German-Austrian economic school, having a strong influence in policy-making from the 1950s to the 1970s. Friedrich List (1841) conceptualised several stages of economic development, associating the linear evolution towards the next stage with the idea of “progress”. A century later, Hoover and Fisher (1949) tagged these stages of development as primitive, agricultural, industrial and services stage, attributing the evolution towards the following stage to transport infrastructure improvement, through the subsequent easing of trade and increasing specialisation in the affected region. The upgrading of an existing transport paradigm occurs when technology introduces new means allowing for increased speed, capacity or reduced cost (Ausbel et al. 1998).

      These new transport technologies are not equally adopted across all the territories, but they often emerge in the most dynamic economic centres, stimulated by a higher demand from economic actors. In line with the observations made by the “modernisation theory”, in Italy the construction of railways and motorways initiated in the early industrialised Northern regions, only expanding to the South decades after their consolidation in the North. Concerning the stages of economic development, although the North developed an industrial capitalism since the mid 19^th century, the South maintained a semi-feudal economic structure until the Second World War (Martinelli 2009), and only initiated a state-led industrialisation in the 1960s under the influence of Perroux's “growth pole theory”. Today, disparities in regional GDP per capita persist, just like the infrastructure endowment gap does: the North-West concentrates the highest densities in railway, road, airway and high-speed rail transport, the ports being the only exception for which the South outperforms over the Northern regions.

Disparities GDP/cap 2008

      Inspired in “modernisation theory”, regional policies during the 1950s assumed the importance of deploying an even transport infrastucture to generate economic development, countering the market inertia to favour the economic hotspots. This was also the case in Italy with the “Intervento Straordinario” (Martinelli 2009), a wide keynesian policy which channelled important investments towards infrastructures in the Southern regions -among other key axes. Thanks to the fast take-off of the Italian economy in the Northern regions during the 1950s, these investments could increase until the 1970s, together with the previously mentioned active industrialisation policy that set new heavy industries in the South since the 1960s -to become “cathedrals in the desert”. The new infrastructures had two major effects. On the one hand, Southern markets were flooded with more competitive products from the North, wiping out Southern local less competitive production, pushing 2 million emigrants towards the North. On the other hand, the industrialisation strategy and the logistical integration of both regional ensembles pulled the South along with the fast growing North (Martinelli 2009), closing the regional gap between them for some 15 years.

      After the oil crisis in the 1970s, the improvement of communication and transport accelerated globalisation processes. The vertically integrated industrial model shifted to a more competitive international division of economic processes, resulting in industrial delocalisation to emerging economies. The Southern cathedrals in the desert collapsed, widening or maintaining the gap existing with the Northern regions. Policies kept investing in transport infrastructures, but the funding was unable to trigger economic development, becoming mere interregional transfers.

     Overall, despite the undermining of modest local production by more competitive products from the North, Southern induced industries were successfully integrated in the economic system from the 1960s up to 1975, benefiting from the demand pull of growing central markets, therefore trickling down growth to the regions. However, the short industrial experience could not generate a strong economic network, and these regions were severely affected by delocalisation. Roads and rails became escape highways for key technicians, managers, entrepreneurs, firms and investment towards more prosperous regions.

     The lesson offered by the Italian case exemplifies that “improvement of transportation infrastructure leads to a reduction of travel time or cost, and hence to an improvement of accessibility to markets or inputs” (Rietveld et al . 1992, 8). However, increased accessibility may have both a positive or a negative effect on regional economic development. It may render exports cheaper, expanding total production and generating economies of scale, that will attract capital and labour. On the other hand, an increased accessibility to markets may provoke that cheaper imports partially substitute domestic products, bringing about diseconomies of scale, thus expelling labour and capital (Ibid.). The effectiveness of improved accessibility as a tool for regional economic development will therefore be closely linked to the previous existence of a dynamic economic activity capable of competing with the newly enlarged market area.

Ausbel, J. H., Marchetti, C., Meyer, P. S. (1998) “Toward green mobility: the evolution of transport” European Review, 6 (2) 137-156.

Eurostat (2013) “Regional GDP per capita in the EU in 2010: eight capital regions in the ten first places” News release 43.

Martinelli, R. (2009) "Cassa per il Mezzogiorno" International Encyclopedia of Human Geography. Elsevier, 446-455.

Rietveld, P. and Nijkamp, P. (1992) "Transport and regional development“ Serie Research Memorandum 50, 1-21. Faculteit der Economische Wetenschappen en Econometrie, Vrije Universiteit Amsterdam.

World Bank (2008) “World development report 2009: Reshaping economic geography” World Bank Publications Herndon, VA (US).