The Geographical Origins of the Wealth of Regions

Cermeño, Alexandra L., Carla Salvo and Jacob Weisdorf

No 20919, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: Why are some regions rich and others poor? This study investigates the geographical origins of Italy’s persistent regional income gap. Using municipal population density as both a proxy for historical income and an outcome shaped by geography, we show that first-nature advantages, such as mild climates and fertile soils, favoured higher population density in Northern Italy from the earliest available data. Second-nature forces (agglomeration and market connectivity) then reinforced this initial lead. We find that first- and second-nature geography jointly explain half of today’s municipal variation in income per capita, whereas pre-unification regional histories account for only about one-fifth.

Keywords: Agglomeration economies; Income inequality; Market potential; Natural endowments; Population concentration; Regional development (search for similar items in EconPapers)
JEL-codes: N90 O15 O18 (search for similar items in EconPapers)
Date: 2025-12
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