Roads and intra‐national trade: Evidence from Italian regions

Abstract

This paper investigates the role of motorway infrastructure in determining the export propensity of Italian regions. First, exporter fixed effects are estimated using a gravity model. Then, in a second step of the analysis, they are used as a proxy for export propensity and are regressed on highways endowment. Since there may be endogeneity issues, to investigate the causal relation between highways and export propensity, a historical route instrumental variable approach is followed, using the ancient Roman road network as a source of exogenous variation. Results show that, even when controlling for geographic, economic, and historical factors, a 10% increase in the provision of motorways leads to about a 1.3–2% increase in exports.