Essays in historical political economy

This thesis brings together three papers in historical political economy that investigate how fiscal institutions and energy transitions shaped Italian development during the Liberal era. Although each chapter is designed as a self-contained article, they are closely connected by a common concern with the long-run determinants of state capacity, local public finance, and industrial geography. The first two chapters analyse the evolution of municipal taxation and the reform of the dazio consumo (the Italian main excise tax), while the third chapter turns to the role of electrification and hydropower in reshaping patterns of industrial location. Read together, they offer a composite view of how fiscal and infrastructural changes interacted in a latecomer country between Unification and the eve of the First World War. The first chapter of this thesis examines the fiscal foundations of Italian municipalities during the Liberal period (1858–1900), with a focus on the widespread reliance on local consumption taxes (dazi di consumo). Using newly constructed datasets on municipal budgets and institutional status, the study explores both the determinants of closed versus open municipalities and the weight of excise duties in local revenues. Results show that size and administrative relevance strongly influenced the adoption of a closed status, while geographic constraints, such as ruggedness, played a minor role. Closed municipalities, typically larger urban centres, derived more than half of their revenues from consumption duties, whereas open municipalities relied primarily on surcharges. Multilevel regressions further highlight the interplay between fiscal policy choices, industrialisation, and pre-Unification legacies in shaping municipal tax structures. Overall, the findings underscore the persistence of Napoleonic fiscal traditions, the heterogeneity of local taxation, and the structural importance of excises in sustaining municipal finance in Liberal Italy. The second chapter focuses on the 1902 reform of the Dazio Consumo, a turning point in the fiscal history of Italian municipalities during the Liberal era. The reform abolished consumption taxes on flour, bread, and pasta—among the most regressive levies—and introduced subsidies to encourage municipalities to dismantle local customs borders. Using a panel dataset of approximately 340 “closed” municipalities, the study examines the joint effects of abolishing flour-related duties and the subsequent decision to open local fiscal borders, applying difference-in-differences and logit models. The findings show that reliance on flour duties strongly influenced both the municipalities’ willingness to accept subsidies and the fiscal impact of the reform. The abolition of flour duties led to substantial reductions in revenues and, crucially, expenditures, which were only partly offset by state transfers. Crucially, affected municipalities did not shift their fiscal policy mix to other sources of revenues, suggesting that the top-down removal of regressive taxes did not prompt a buildup in fiscal capacity. These results highlight the structural weaknesses of municipal fiscal capacity and underscore the increasing role of central government intervention in local public finance. Finally, the third chapter shifts to another key element of Italian development in the long run: the electrification of its industrial sectors between 1901 and 1910. Lacking domestic coal reserves, Italy turned to hydropower as a substitute energy source, making electricity a potential driver of industrial agglomeration. Using newly assembled provincial-level data on GDP, employment, literacy, energy stocks, and market potential, the study applies a framework that integrates factor endowments and New Economic Geography approaches. Results show that electricity availability became an increasingly decisive determinant of industrial location, surpassing traditional factors such as human capital and non-electric energy sources by 1911. Backward linkages also played a role, while economies of scale and forward linkages proved less relevant at the provincial level. The findings highlight how electricity—“white coal”—reshaped locational dynamics in Liberal Italy, underscoring the importance of energy transitions for industrial diversification in coal-scarce economies. While the chapters can be read independently, I hope that, taken together, they provide a coherent narrative of how local fiscal arrangements and technological change interacted to shape the trajectories of Italian municipalities and regions in the decades leading up to and following the turn of the twentieth century.