While it is well established that innovation is one of the main drivers of economic growth, there is no consensus in the literature on the impact that Innovation had on Italian industrial performance. Since the Unification, Italy has been an importer of foreign technology, having limited availability of natural resources and human capital. This caused on the one hand few investments in scientific research and in the production of autonomous technology, and on the other hand an increase in the ability to adapt these new technologies and to spread them through knowledge. According the literature, Italy failed to achieve economic growth driven by technological change by missing the opportunity to be competitive in High-Tech Sectors, especially because of a weak performance in developing frontier technologies and technological Knowledge (Giannetti, 1998).
The aim of this research project is to answer the following question: Why did Italian industry not boost innovation in capital-intensive sectors in the first half of 20th century?
Italy had low levels of expenditure on R&D compared to other major OECD countries (Malerba, 1993) and some scholars state that Italian growth episodes were fortuitous. However, R&D data fails to explain the overall innovation activity by omitting technological advances in labor intensive industries (Cohen & Federico, 2001). A recent work of Antonelli & Feder (2019) finds evidence of a significant technological change in the period before the Golden Age. Starting from this evidence, we try to extend the existing literature by built a new real wage data-set, estimated by industrial sectors during the Italian Interwar period.The role of high real wages on innovations is discussed by Allen (2006) in the British historical context. To investigate this connection in the context of Italy, we aim to implement an RDD analysis to evaluate the effect of the fascist policy of low heavy industrial wages on the technological improvements.
Notwithstanding there is a wide literature on Italian innovation system, especially in the economic history field, scholars continue to define the period between the two World Wars more as a technological failure than a success. This could be related to the scarce availability of statistical data for this period.
The goal of this research proposal is to reverse this statement by testing if economic and institutional conditions of the interwar period created a favorable environment that driven the successful performance of Italian light industries. Furthermore, we would try to build a new available dataset to further analyze regional differences, both in terms of economic development and in terms of inequality. Indeed, some industrial wage statistics during the interwar years were manipulated by the fascist regime. This confirms the view that previous works could underestimate the innovation capabilities of the interwar period (for more details see the work of Favero 2010).
Another feature of the present project regards the methodology. The proposal to study the link between high real wages and innovation by using a regression discontinuity approach could appear, prima facie, unreasonable. Researchers usually use this approach to evaluate the impact of social programs, particularly in education intervention analysis.
However, the historical context creates the ideal environment to implement our analysis. During the fascist era, the regime fixed real wages through wage cuts, price policies and abolition of workers union. This overcomes the problem of reverse causality that usually rise in treatment effect analyses.
References
Calonico, S; Cattaneo M.D., Farrell,M.H, Titiunik R. 2019. ¿regression discontinuity designs using covariates. Review of Economics and Statistics. Vol 101(3).
Favero, G. (2010). Le statistiche dei salari industriali in periodo fascista. Quaderni storici, 319-357.
Giordano, C; Giugliano, F.2011 ¿A tale of two fascism: Labour Productivity growth and Competition Policy in Italy:1911-1951¿. Economic History Working Papers N.28.
Thistlethwaite, D., and D. Campbell. 1960. ¿Regression-Discontinuity Analysis: An Alternative to the Ex Post Facto Experiment.¿ Journal of Educational Psychology 51: 309-317.