“Reconstruction Aid, Public Infrastructure, and Economic Growth” by Dr. Michela Giorcelli
The University of California – Los Angeles
This paper studies the effects of international reconstruction aid on long-term economic growth. It exploits plausibly exogenous differences between Italian provinces in the amount of grants disbursed through the Marshall Plan for the reconstruction of public infrastructure. Provinces that received more reconstruction grants experienced a larger increase in the number of industrial firms and workers. 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 networks damaged during WWII.