DP8758 | Italy?s Comparative Advantage: A Long-Run Perspective

Publication Date

01/01/2012

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Abstract

The growth of the Italian economy over the past 150 years since unification was accompanied by a dramatic increase in the country?s integration with European and global commodity markets: foreign trade in the long run grew on average faster than the overall economy. Behind the dynamics of aggregate trade, Italy?s comparative advantage changed fundamentally over the last 150 years. The composition of trade, in terms of both commodities imported and exported and in terms of trading partners, developed from a high concentration of a few trading partners and a handful of rather simple commodities into a wide diversification of trading partners and more sophisticated commodities. In this paper we exploit a new long-term database on Italian foreign trade at a high level of disaggregation to document and analyze these changes. We conclude with an assessment of Italy?s growth prospects from a historical perspective.