The Italian Monetary Unification and the North/South Divide

In the scientific debate on the origins of Italian North/South divide the effects of monetary unification achieved by the new Kingdom of Italy in 1862 are hardly taken into account. This paper wants to focus the attention on this specific aspect, trying to understand if the adoption of single currency, in reality necessary step after political unification, has been able to influence the subsequent, different development in the North and in the South of Italy. Indeed, economic and monetary integration processes are closely related with regional development policies. The theory of the optimum currency area is the tool we will use to interpret what is happening after the Italian monetary unification. Despite the difficulties due to availability of data, the research leads to the conclusion that Italy was not an optimum currency area and the single currency, as in the Europe of early 2000s, is not enough to create it. The positive effects of greater trade integration, determined above all by the improvement of the transport system, in particular of the railways, were cancelled by the productive specialization induced by the single currency. In fact, monetary unions favor the shifting of financial resources towards the areas having a comparative advantage in a given sector. This, as well as the low factor mobility, determined vulnerability to asymmetric shocks, that can no longer be absorbed by the exchange rate. The Mezzogiorno was penalized, especially after the agrarian crisis in the 1880s, when it would need exchange rate depreciation. Monetary unification, without being the main cause, has favored the occurrence of the gap between North and South of Italy.