Causes and Costs of Italian Port Underdevelopment

Abstract

Port infrastructure has been a key driver of development in the history of the Italian peninsula, which has distinguished itself for the presence of thalassocracies since before the Ancient Romans. Today, Italy is poorly connected to global shipping lines, notwithstanding its presence at the heart of one of the world's most important commercial passageways. Given these two pieces of evidence, this paper sets out to investigate what the causes and costs of the current port underdevelopment in Italy are. The research uses an interdisciplinary approach, using the disciplines of economics and history to create a holistic understanding of the research question. Firstly, through a historical analysis several causes that have led to the loss of the maritime vocation of Italy are identified. Then an empirical analysis, using the gravity model for international trade though a panel regression, is developed to measure the causes and costs, measured in lost trade opportunity, of port underdevelopment. This however first requires the research to present a literature review to identify which explanatory variables are relevant and best suited for the model; identifying port infrastructure, intermodal infrastructure, and customs efficiency. Moreover, through the literature review, other valuable insights that are not possible to include in the empirical analysis, such as the governance structure, are determined. Lastly, a simulation of the trade potential under improved conditions is used to quantify what the volume of trade flows would be if ports were more developed, thus identifying the costs of the underdevelopment. The paper concludes with an integration of the various disciplinary perspectives previously considered to provide a holistics conclusion to the research question.