Reconstruction Aid, Public Infrastructure, and Economic Development⇤ NicolaBianchi MichelaGiorcelli July 24, 2018 Abstract This paper studies how the modernization of transportation infrastructure a↵ects long-term economic outcomes. It exploits plausibly exogenous di↵erences between Ital- ian provinces in the share of modern infrastructure—mainly roads and railways—built with grants disbursed through the Marshall Plan. Provinces that could modernize a larger portion of their infrastructure stock experienced higher increases in agricultural production, especially for perishable crops that benefitted the most from an efficient transportation system. Agricultural firms in these areas also invested more in motorized machines that decreased the employment of manual labor. In the same provinces, we observe more entry of small firms in the industrial sector, as well as a larger expansion of the industrial and service workforce. JEL Classification: H84, N34, N44, O12, O33 Keywords: international aid, economic growth, reconstruction grants, Marshall Plan, innovation ⇤Contact information: Nicola Bianchi, Kellogg School of Management, Northwestern University, and NBER,
[email protected]; Michela Giorcelli, University of California, Los Angeles, and NBER,
[email protected]. We thank Ran Abramitzky, Thor Berger, Meghan Busse, Nicholas Bloom, Dora Costa, Pascaline Dupas, Fran¸cois Geerolf, Therese McGuire, Katherine Meckel, Melanie Morten, Tommaso Porzio, Nancy Qian, Melanie Wasserman, and seminar and conference participants at UCLA, Northwestern, UC-San Diego, IFN Stockholm Conference, Barcelona GSE Summer Forum, and the Cliometric Society Annual Conference for helpful comments. Antonio Coran, Zuhad Hai, Jingyi Huang, and Fernanda Rojas Ampuero provided excellent research assistance. We gratefully acknowledge financial support from the Economic History Association through the Arthur H.