The Role of the Marshall Plan in the Italian Post-WWII Recovery⇤ NicolaBianchi MichelaGiorcelli February 27, 2018 Abstract This paper studies the e↵ects of international aid on long-term economic growth. It exploits plausibly exogenous di↵erences between Italian provinces in the amount of grants disbursed through the Marshall Plan for the reconstruction of public in- frastructures. Provinces that received more reconstruction grants experienced a larger increase in the number of industrial firms and workers after 1948. Individuals and firms in these areas also started developing more patents. The same provinces experienced a faster mechanization of the agricultural sector. Motorized machines, such as tractors, replaced workers and significantly boosted agricultural production. Finally, we present evidence that shows how reconstruction grants induced economic growth by allowing Italian provinces to modernize their transportation and communication network. 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,
[email protected]. We thank Ran Abramitzky, Nicholas Bloom, Dora Costa, and Pascaline Dupas. 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 a Arthur H. Cole Grant. 1 Introduction International aid is one of the main sources of revenues for many developing countries. Starting in 1970, the United Nations set an explicit target for member countries of OECD’s Development Assistance Committee (DAC): 0.7 percent of national income spent for de- velopment assistance.1 In recent years, the UN re-endorsed this target by including it in the 2005 Millennium Development Goals and the subsequent 2015 Sustainable Development Goals.