Technical Change, Non-Tariff Barriers, and the Development of the Italian Locomotive Industry,1850-1913

The locomotive industry was one of the relatively sophisticated “high-tech” sectors in which Italy, a latecomer country, was successful before 1913. Using technical data on the performance of different vintages of locomotives, we construct a new industry-level index of technical change. We also study the impact of different policy instruments (import duties, non-tariff trade barriers and other discretionary interventions) in shaping the development of the industry. Our reassessment reveals the sound technological performance of Italian locomotives; the successful growth of this industry; and the critical role played by non-tariff barriers in its development.


Introduction 1
The relationship between the adoption of new technologies in developing countries and comparative economic development continues to generate considerable research in economics and economic history. 2 In his work, Alexander Gerschenkon noted that the "technology gap" with respect to the technological frontier provides developing countries with the opportunity to quickly absorb the "backlog of technological innovations" of advanced countries and catch up with them (1962, p. 8). This process of international technology diffusion is purported to be at the root of the process of convergence with Britain by several European countries during the nineteenth century (Landes 1969). However, catching up is by no means automatic. Rather, it requires a significant mobilization of resources, skills, and capitals over a broad front, often coupled with a complex "mix" of policy interventions towards infant industries, ranging from trade and industrial policies to other forms of government actions. 3 In his assessment of the policy mix adopted by Italian governments in the second half of the nineteenth century, Alexander Gerschenkron was characteristically blunt, pointing to a generalized "ineptness of government industrialization policies." In particular, he argued that Italian industrialization would have benefited from a more "rationally conceived and executed tariff." The structure of the tariff, favoring iron and steel in a coal-less country, represented a major impediment to the development of the Italian mechanical engineering industry, which "was largely left to its own devices" (Gerschenkron 1962, pp. 80-83). Other historians have instead argued that the sluggish development of the industry lay in the overall "technical and organizational backwardness of the sector" and not in mistaken policies. 4 This paper sheds new light on these issues by reassessing the case of the steam locomotive industry, one of the few relatively "high tech" sectors in which Italy was successful before 1913. The development of this industry was shaped by a complex mix of policies comprising trade policies, "non-tariff trade barriers," and other discretionary interventions. The locomotive industry, thus, constitutes a useful vantage point to reconsider the general effectiveness of the different types of interventions adopted by the Italian governments in the period 1850-1913. Our analysis relies on a new index of technical change based on technical indicators of the performance of different vintages of steam locomotives. The dataset includes some six thousand steam locomotives in operation in Italy from 1839 to 1913. The index casts doubt on the prevailing view that the market share of Italian steam locomotive manufacturers was severely limited by their technical backwardness. On the contrary, the new quantitative evidence on technical change suggests that the technical capabilities of Italian producers were fully adequate 1 We are grateful to an anonymous referee for useful suggestions. We thank Federico Barbiellini Amidei, Alberto Dalmazzo, Giovanni Federico, Stefano Fenoaltea, Alfredo Gigliobianco, Piero Muscolino, Tommaso Proietti, Gianni Toniolo and Michelangelo Vasta for helpful discussions and suggestions. This paper has also benefited from comments at economic history seminars at the Bank of Italy and the University of Siena. 2 See Fagerberg (1994) for a useful survey. 3 For a recent compact treatment see Allen (2011). For a classical analysis of the case of South Korea, see Amsden (1989). 4 According to Toniolo (1977, p. 672), a more favorable tariff could have resulted in an increase of some 50 percent of the output of the mechanical engineering industry, which in turn would have amounted to an increase of some 7 percent in aggregate industrial production in 1908. when compared to those of foreign producers. Efficient production required then an annual production of about 50 locomotives per firm. Tariff-based protectionism, with positive net protection in force since the mid-1880s, was not sufficient to reach this goal. Rather, this production level was achieved through specific procurement policies assuring regular orders to national producers. It was these non-tariff barriers that played a critical role for the development of the Italian locomotive industry.

The steam locomotive industry in Italy: background and motivation
At the point of political unification of Italy in 1861, the railway network was limited with about 3,900 km in 1864, against 18,000 km in the United Kingdom, 16,000 km in Germany, and 12,000 km in France and the system had an eminently local character, as a result of the uncoordinated investments of the different pre-unitarian states in railway infrastructure. Political unification provided a major stimulus towards the expansion and "rationalization" of the network, so that by 1910 the network comprised about 15,300 km. However, even after unification, various sections of the network were operated by several private franchise companies. A major reorganization took place in 1885 with "Railways Conventions" assigning the management of the network to three major private franchise companies under a renewable contract: the Rete Adriatica (RA) and the Rete Mediterranea (RM) covering the peninsula along a west-east divide, and, the Rete Sicula (RS), operating in Sicily. 5 In 1905 the operation of the railway network was nationalized and taken over by the Ferrovie dello Stato (a big state-owned company with about 100,000 workers).
Debates on Italian industrialization initially focused on the relation between railway extension and market unification (Romeo 1959;Sereni 1966), and on the connection between the development of the railway network, the demand for industrial products, and the rate of economic growth (Gerschnekron 1962). To date, the most comprehensive economic appraisal of the relation between railroads and industrial growth in post-Unification Italy is provided by Stefano Fenoaltea (1983, 2011). Fenoaltea's sophisticated appraisal points to the importance of the composition of investment. From 1861-1895, investment was devoted to construction of railway tracks (mostly using unskilled workers for earthworks and related activities) with a relatively reduced share (10 percent) devoted to the purchase of metalmaking or engineering products. From 1896-1913, the share of investment devoted to engineering products rose to about 30 percent of the total annual railway investment. Most importantly, maintenance (both of railway lines and of rolling stock) grew throughout this period so that by 1913 it was such that, "on a value added basis, the maintenance of [rolling stock] was as important as their initial fabrication and, unlike the latter, it was immune from foreign competition" (Fenoaltea 1983, p. 49).
From an engineering standpoint, the steam locomotive is a sophisticated piece of equipment, comprising hundreds of parts, most of them requiring accurate manufacturing and processing. Philip Scranton (1997, p. 99) regards steam locomotives as a quintessential example of nineteenth century "specialty production": "no specialty product was then more complicated than a railway engine and few were as heavily taxed in use." Mass production was not feasible: steam locomotives were manufactured in small batches and they often had to incorporate particular specifications tailored to the needs of individual customers. This meant that locomotive manufacturers had to marshal a significant breadth of engineering competences and skills. Even if the broad contours of locomotive design were established by the 1850s, throughout the second one-half of the nineteenth century, steam locomotives underwent a stream of technical improvements, which compelled a continuous revision and updating of many details of locomotives design and manufacturing. 6 For these reasons, the steam locomotive provides an interesting perspective on the absorption of an "advanced" technology by latecomer countries. In comparative perspective, it is possible to distinguish two main "waves" in the international diffusion of the steam locomotive. During the first wave (1830-1860), the manufacturing of steam locomotives became established in England Belgium, France, United States, and Germany. During the second wave (1880-1920), we witness the emergence, with varying success, of the manufacturing of steam locomotives in Italy, Russia, Spain, and Japan. 7

The steam locomotive industry in Italy: new evidence, new conjectures
The evidence presented in this article is largely based on a new dataset described in the Appendix. It comprises two major components. The first one includes information on 5,700 locomotives, both domestic and foreign. 8 For each locomotive we know the year and place of production, the producer's name, and a numerical identifier. The second component is based on the authoritative handbook by Giovanni Cornolò (1998) providing technical characteristics and performances of the locomotives for the period 1850-1913. By combining these two components we can chart in detail the technological characteristics of the different locomotives operating in each year.

The process of import-substitution
The development of Italy's locomotive market is described in Figure 1 and Table 1 illustrating both the total number of locomotives and those produced domestically. 9 6 See Sinclair (1907). According to Greggio and Kalla-Bishop (1985, p. 99), "It was not until 1890 that fundamental design theory could be said to be settled, for what was decided then lasted until the end of steam." Analogously, Cardwell (1994, p. 348) regards the end of the nineteenth century as the moment in which the locomotive had reached "a point of near-perfection." 7 The domestic production of steam locomotives in Spain remained limited until WWI. See Comín et al. (1998) andCayón García andMuñoz Rubio (2005). On the more successful Japanese case, see Ericson (1998). In the Italian case, the production of steam locomotives has been investigated by Merger (1986Merger ( , 1989, and, more recently, by Ciccarelli and Fenoaltea (2012). The works by Merger are mainly concerned with the production of national manufacturers in quantitative terms and do not consider in detail the technological performance of the different models of locomotives. Ciccarelli and Fenoaltea (2012) present annual estimates for the rail-guided vehicles industry both at the national and regional level. 8 Sources and methods of the locomotive dataset are described in the Appendix. 9 The data on locomotive imports in Figure 1 are quite consistent with the data on Italian foreign trade (Federico et al. 2011). It is worth noting that in the foreign trade data-set, quantity data on locomotive imports are reported in tons, whereas in Figure 1 and Table 1 we are dealing with number of locomotives.
Until mid-1880s, domestic production was limited and the market was dominated by foreign manufacturers. The Italian import market was initially dominated by English producers, then by French producers, and finally by German manufacturers for whom, the Italian market was particularly significant. The Maschinenfabrik Esslingen, among the leading German producer of steam locomotives, exported during the period 1883-1887 about one-half of its production in Italy (Hertner 1984, p. 30). Furthermore, as noted by Albert Schram (1997, p. 61) German banks backed the Rete Mediterranea, and the Railways Conventions of 1885 marked the beginning of German investments in Italy. During the 1890s few locomotives were purchased, but after 1900, demand resumed with Italian producers substantially increasing their market share.
Using data on the number of locomotives, Michèle Merger (1986Merger ( , 1989 argues that the limited production of Italian manufacturers during the period 1861-1885 is due to three concomitant factors: the limited depth of technological capabilities of national firms, a lack of specialization leading to increasing costs, and the penalties induced by the tariff on iron. After 1885, with the new Railways Conventions, a new wave of investments took place. In this phase Merger argues that the increased domestic production was a result of the public policies favoring national manufacturers, in particular Pietrarsa, Ansaldo, and Breda. 10 The ultimate consolidation of the national industry of steam locomotives, according to Merger, takes place after 1905 when the production of private national producers is elicited by a new wave of investment following the creation of Ferrovie dello Stato (FS), the new public operating company managing the entire main network (including both new construction and maintenance of the railway lines, and the maintenance of rolling stock). However, the increase in the number of domestically-produced locomotives tells us little about their technical quality. Figure 2 shows the series of locomotives produced for the Italian market by three major countries (England, France, and Germany). The historical sequence pointed out in Merger's account is also visible in this figure. In an initial phase, the Italian import market is dominated by English producers, in a second phase by French producers, and finally by German manufacturers (for whom, the Italian market was clearly significant).

Patterns of technical change
We assess the dynamics of technical change using the traditional weight-to-power (whp) ratio, a synthetic indicator that is widely used in the engineering literature and represents "a clear expression of technical progress" in steam locomotives (Diegoli 1961, p. 114). The whp ratio provides a measurement of the performance of the locomotive in a metric which is independent of its size, facilitating thus comparisons across different models and designs. 11 For each locomotive we computed the whp ratio using the data from Cornolò (1998). The whp ratio represents, therefore, our proxy for the technical performance of the various "types" of 10 These companies had been able to develop a certain base of engineering capabilities in locomotive building by virtue of different channels of knowledge transfer (recruitment of foreign personnel, travels abroad, and licensing of foreign patents), see Merger (1986) and Vasta (2002). 11 The whp ratio, as any other synthetic indicator of technological performance, has of course its own limitations. First, it is a ratio, so it is not directly telling on locomotive weight and power, each per se relevant. Second, the whp is not particularly informative on other technological characteristics such as locomotive top-speed, fuel efficiency, etc. locomotive, with lower values denoting better performance and thus improved technology. 12 The different "types" of locomotives (Gruppi FS) were classified in 1905 by the engineers of the newborn Ferrovie dello Stato. Locomotives belonging to the same group are very similar in terms of technical characteristics. As Appendix A details, our sample includes more than 100 Gruppi FS. We construct an industry-level index (WHP) of technical change as the weighted average of the technical performance of the different locomotive types entering in service in that year: 13 where t represents time (year), and This index comprises only the locomotives introduced in a given year. While the sources indicate systematically the year in which a locomotive entered in operation, the information about the year in which it was scrapped is not systematic. This prevents us from constructing the index for the composition of locomotives in operation in a given year. The index of technical change, therefore, should be regarded as an index representing the level of technological performance of the investment in locomotives in a specific year. Figure 3 shows the evolution of the WHP index for Italian and foreign manufacturers. The area shaded in gray is delimited, year by year, by the maximum and minimum sample values of the WHP index. Interestingly enough, after 1870, it is not uncommon to find Italian manufacturers among the best performers (locomotives with minimum value of the whp ratio in each year).
The WHP index is characterized by a decreasing trend, reflecting technical progress for both domestic and foreign locomotives. The first period (1850-1868) has wide fluctuations, which is an outcome of the limited sample size. The three decades from 1868 to 1898 shows substantial stability, with a rapid acceleration from 1898 to 1913. This pattern is not surprising. Railways, in Italy as elsewhere, were first laid out across the plains. Conquering the mountains required more powerful locomotives and better railway infrastructures, including tracks, bridges, and embankments. The rapid acceleration observed in this last phase is concomitant with the 12 An increase in locomotive power (due to the introduction of, say, a bigger boiler) leaving unaltered the whp ratio is not interpreted here as technological progress. The whp ratio is a performance indicator that seems particularly relevant in the Italian context also because "The Italian lines had numerous metal girders of moderate resistance, so the locomotives had to be of reduced weight, both per axle and per linear meter; as a consequence [Italian locomotives] were forced to have a particularly high power" (Diegoli 1961, p. 108). From this point of view the evolution of Italy's steam locomotive sector during the nineteenth century can be understood as a struggle between the increasing weight of locomotives and rails'-of iron first of steel then-capability to bear it. 13 Van Dijk and Szirmai (2006) have constructed a similar index of technical progress for the Indonesian pulp and paper industry. 14 For example: if Group A includes ten locomotives with a whp index of 90, and Group B includes 40 locomotives with a whp of 70, then WHP = 0.2 * 90 + 0.8 * 70 = 7. introduction of two major technical innovations: compounding and super-heating (Tey 1910, pp. 28-36;Diegoli 1961, pp. 108-9), both of which reduced the weight-to-power ratio. Compounding and super-heating were the key features of the "second-generation" of steam locomotives. Compound locomotives were adopted in 1894 by the Rete Mediterranea and only later by its competitor, Rete Adriatica. Table 2 complements Figure 3 by reporting the average WHP by decade separately for foreign and domestic producers; figures on the main Italian producers of the time are also reported in columns 3-5.
The evidence presented so far is not consistent with the limited engineering capacity suggested by the prevailing literature (on this point see Fenoaltea 2011, p. 150). Rather it supports contemporary views arguing that, at least from the late 1870s, Italian manufacturers were indeed capable of designing and producing steam locomotives of quality fully comparable to that of foreign competitors, or, more precisely, of the models of locomotives that English, French, and German manufacturers were importing in Italy. For example, at a conference for the 1881 Milan Exposition, Professor Leonardo Loria stated: The national locomotives are perfectly equal, both in terms of manufacturing and assembling of components, to the best foreign locomotives … . Our locomotives are not anymore mere imitation of foreign locomotives, manufactured assembling a number of components imported from abroad, rather they are locomotives fully adapted to the special conditions of our railway network, almost completely manufactured by us, where our engineers introduce important innovations … . And, as far as the cost of production is concerned, today we are not far away from foreign firms. (Loria 1881, pp. 76-77) Additional corroboration of this point can be found in the detailed account of Cornolò who mentions other models of locomotives (such as the "Ariosto" or the "Frescot") designed during the 1870s and early 1880s that were crowned with critical acclaim at international exhibitions, and in the engineering literature. 15

Government Policy
The domestic production of locomotives increased over the nineteenth century. In this section, we examine the impact of government policy on the growth of the industry. Interestingly, from 1870 to 1885, several parliamentary select committees (PSCs) debated alternative forms of State intervention to sustain the national industry. Of particular relevance here are the early 1870s PSC "on industry," the late 1870s PSC "on railways," and the mid-1880s PSC "on the revision of the trade tariff." The PSC "on industry" (Comitato dell'inchiesta industriale) investigated the capacity to compete with foreign producers and the ways in which custom duties increased domestic competitiveness. 16 The engineering sector was one of the most debated with many observers and practitioners (including businessmen, managers, and engineers) interviewed. The main locomotive producers were Ansaldo (near Genoa, established in 1854) and Pietrarsa (near Naples, established in 1842). They were asked about the effects of import duties on the domestic production of steam locomotives. Both Ansaldo and the Pietrarsa argued that the then tariff's structure worked against the domestic production of locomotives. 17 Tables 3 and 4 reproduce the evidence referring to the Pietrarsa (Naples) and Ansaldo (Genoa) workshops. 18 Table 3 reports the cost structure of a typical locomotive in the Pietrarsa workshop. Column 2 shows that some 70 percent of a "standard" steam locomotive was made of iron, while the remaining 30 percent was of pig-iron, brass-tubes, copper, steel, and bronze. Column 4 reports the total physical cost of production (excluding labor and transport costs). The total cost of materials was 29,610 lire, and 32,970 lire once import duties are included (corresponding to a 10 percent increase). The last line shows that the import duty on a steam locomotive considered as a finished product amounted to 4 lire per 100 kg. With a total weight of 40 tons, the import duty amounted to 1,600 lire. 19 The tariff's structure, therefore, implied an additional cost of 3,360 lire for domestically-produced locomotives relative to 1,600 lire for imported locomotives, resulting in a negative protection for Italian locomotive producers. Table 4 reports similar data provided by Ansaldo. For a standard "1858 Government type" locomotive, the import duties on raw materials were 2,811 lire, well above the 1,570 lire paid as duty to import the same locomotive from abroad. Although the calculations by Ansaldo are extremely coarse, they show that in the early 1870s at least one-half of a locomotive was made up of highly-protected-iron, amounting to a negative protection.
The PSC "on industry" concluded that: "there is no balance between the ("high") tariff on iron and the one ("low") on machines"; therefore "it is necessary to reduce the tariff on iron," or "alternatively, it is necessary to raise the tariff on machines" (Comitato dell'inchiesta industriale 1874, p. 6). In fact, both the duties on iron and locomotives were raised over time. In the subsequent PSC "on railways" (Commissione d'inchiesta sull'esercizio delle ferrovie italiane), Pietro Peirano, a manager of Ansaldo confirmed that the key factor forcing his company to give up the production of locomotives was the penalty induced by the tariff rather than the lack or backwardness of technological competency. 20 Ansaldo and Pietrarsa's delegates were also consulted by the PSC on "the revision of international trade tariff" (Commissione d'inchiesta per 17 As already noticed by Ciccarelli and Fenoaltea (2012), Felice Giordano-in his 1864 appraisal of the iron and metal working industry in Italy-argued convincingly that the engineering establishments of Naples and Genoa could potentially produce locomotives at prices that were similar to that of foreign ones. The argument made by Giordano refers to total cost of production, so that while iron was surely more expensive in coal-less Italy, labor was there relatively cheaper than in other countries (Giordano 1864, pp. 102, 359). 18 The sources report an import duty on steam locomotives of 4 lire per 100 kg in one case (Pietrarsa), and 4.62 lire per 100 kg in the other (Ansaldo). From that evidence one can infer that in one case (Pietrarsa) the data refer to some year between 1866 and 1870, while in the other case (Ansaldo) to either 1871 or 1872. 19 Giordano (1864, p. 349) reports an input weight loss that may reach some 25 percent for certain materials. As a result, the negative protection illustrated in Tables 3-4 is surely underestimated. 20 Peirano confidently stated "We could outcompete foreign firms if raw materials were exempted from import duties." Even if self-interested, in our view the statement probably reflects a sincere assessment. In the same interview it is also discussed the special procurement policy practiced by Ferrovie Meridionali in favour of Pietrarsa. Clearly, if Peirano had not been intimately convinced of the critical role of the tariff, the best course of action would have been to advocate for the extension of a similar procurement policy rather than the revision of the tariff (Commissione d'inchiesta sull'esercizio delle ferrovie italiane 1879, pp. 371-72). la revisione della tariffa doganale) instituted in the mid-1880s and reaffirmed that the cost of protecting the metal-making sector (with high import duties on iron and other production inputs) represented a still too heavy burden for the engineering sector. 21

Net protection on steam locomotives
As shown in Figure 4, subsequent tariff reforms-above all that of 1887-gradually ensured a positive protection to Italian producers of steam locomotives. The vertical distance between the continuous and dashed line provides a measure of the netprotection on steam locomotives. Obviously the measure is rough for several reasons. Iron was not the only input in the production of a steam locomotive, though most relevant in terms of weight. Second, Italian import duties were mainly tied to weight (not to value), and thus less effective the higher the price of imported goods. Finally, but importantly, the inputs' weight losses occurring during the production process are not considered. Including them would shift the dashed line upward perhaps by as much as 20-30 percent. 22 Despite these limitations, Figure  4 tentatively suggests that the net protection on steam locomotives became positive over time: a consequence of the increase, in different proportions, both of the import duties on iron and locomotives. Import duties on steam locomotives were raised from 4 to 4.62 lire in 1871; 4.62 to 8 lire in 1873; 8 lire to 14 from 1888. Import duties on iron were raised from 4.62 lire to 6.50 in 1888 and then lowered to 6.00 lire from 1892. 23 To sum up, the evidence we have discussed so far suggests that the structure of the tariff rather than alleged technological backwardness represented the main bottleneck stifling the expansion of the industry up to mid-1880s ( Figure 1). 24 This became less stringent as the effective rate of protection on steam locomotive rose in the late 1880s. 25 The growth in production after 1885 is generally seen as the result of two policy changes. The first is the aforementioned 1887 reform of the tariff that, raising the import duty on steam locomotives from 8 to 14 lire per 100 kg. 26 The second is the 5 percent clause introduced by the Railways Conventions of 1885, which required that locomotives procurement contracts should be assigned to national manufacturers if their prices were less than 5 percent higher than the best offer of foreign competitors. 27 This is a point of contention in the literature: several historians argued that the 5 percent clause was probably too weak to exert a major impact (Gerschenkron 1962, p. 371;Caizzi 1965, p. 381;and Papa 1973, pp. 50-51), but the most recent contributions such as Merger (1986, p. 84), Federico and Giannetti (1999, p. 1134), and Giannetti and Vasta (2012) claim rather that the clause played an important role in the "take-off" of domestic production of steam locomotives after 1885.

The silent procurement policy of the 1885-1899 period
There are, however, two other features of the Railway Conventions of 1885 that have received only limited attention in the literature, but are possibly far more important than the 5 percent clause and the revision of the tariff in accounting for the expansion of the domestic production. The first is the special endowment of 15 million lire granted, with the reorganization of the railway system in 1885, to the three major operating companies to purchase railway equipment and material and also to renew their locomotive fleet (Merger 1986, p. 81). The second is the active procurement policy that was put in place after 1885, which, although not established by law, amounted to favoritism of "national champions" well beyond the preference arising from the 5 percent clause.
The point is clearly stated in an official publication of the "public works" ministry explicitly acknowledging that a segment of the Italian market for locomotives was to be reserved for national manufacturers: In the case of locomotives the protection afforded by the aforementioned article [i.e., the five per cent clause], was not sufficient to allow national firms to win procurement contracts and, even a higher protection would have not been enough. Hence, in order to encourage the Italian locomotive industry, which is still in its infancy and it is practiced by very few firms that are now constructing the plants necessary to win against foreign competition, several procurement contracts have been assigned to these firms by means of private deals, fixing prices in such a way to allow these firms to manufacture locomotives without making losses and not making a too heavy burden for the State. (Ministero dei lavori pubblici 1889, pp. 501-2) The 5 percent clause introduced by the Railway Conventions of 1885 was to be applied to contracts assigned by means of formal competitive calls ("licitazione"), but the franchise companies could also procure locomotives directly from the manufacturers outside of the competitive system as seen in Table 5. Italiana Ernesto Breda (1908, p. 50), Breda exported in the 1892-1902 decade 137 steam locomotives mostly in Romania and Denmark (Società Italiana Ernesto Breda 1936, p. 66); Popescu (1987, p. 333). It may be worth noting that the Romanian market of the time was dominated by major producers such as Beyer & Peacock, Henschel, Maffei, and Wiener Lokomotivfabriks. 27 Ministero dei lavori pubblici (1901, pp. 203-204); see in particular footnote 1.
Two points merit attention. Columns 4 and 5 show clearly that the 5 percent clause was insufficient to tilt the price advantage in favor of national manufacturers. Second, a significant stimulus to the national industry was implemented by means of special deals. 28 In particular, from the Railway Conventions of 1885 to 1900, the domestic production of steam locomotives was assigned either by national auctions (284 units out of 595) or by private negotiations (311 units out of 595). To be sure, the price of foreign locomotives was lower than national ones, particularly so in the case of locomotive awarded through direct procurement contracts (about 74 thousands lire against about 48 thousands lire). Most likely, this price differential reflected both the possible higher efficiency of foreign over national producers, but also the existence of implicit agreements guaranteeing high prices to Italian producers. This point, largely overlooked in the current literature, was clear to contemporaries at the point that Lampugnani (1890, p. 745), when referring to Italian producers claims that: " … international auctions were abandoned … and about 1/3 of locomotives orders to Italian producers was agreed with national auctions and about 2/3 through private negotiations".
A careful analysis of parliamentary proceedings provides a more complete picture of the rising protectionist mood of the time and, more generally, of the various forms of State intervention in the railway sector. Here below, for reasons of space, we can provide just a summary account of these debates.
At close reading, the adoption of stronger protectionist measures to favor Italian producers appears to be a leitmotiv of the parliamentary discussions. A first example is provided by the debate culminated on February 7, 1885 with the rejection by the Chamber of Deputy (188 Deputies against the motion, 127 in favor of it) of the so called "Baccarini motion" (Camera dei Deputati 1885). The motion proposed that: "Any future acquisition [of rolling stock and other material] by the railway companies should be satisfied through orders to national producers. Only in exceptional cases, after Government approval, orders can be placed to foreign producers." 29 Sure enough, the motion was rejected; but the fact that about forty percent of voters were in favor of excluding altogether foreign producers from the Italian locomotive market clearly shows how rooted was protectionism among policy makers of the time. Another revealing episode is the so called "Colombo-motion" of 1891 (Camera dei Deputati 1891a, pp. 370-71), from the name of the proponent, Giuseppe Colombo, engineer, entrepreneur, and politician of the time. The motion stated: "The Chambers of Deputies asks the Government to study the proper way to guarantee to the national producers the continuity over time of procurement contracts that the public works ministry and other public agencies will administer […]." The Colombo-motion, approved by the Parliament, might appear a bit vague at a first reading, but is centered on the crucial argument of guaranteeing to the national industry a regular flow of demand. On this specific issue, Vittorio Ellena, chief authority on the matter of Italy's industry and trade policy argued that: "to achieve adequate efficiency a firm should produce one locomotive per week." (Camera dei Deputati 1891b, p. 278). Finally, about ten years later, the spirit of the "Colombo-motion" of 1891, was recalled in a motion (approved by the Parliament) asking to the Government "… to present a plan [on future acquisitions of rolling stock] to ensure the regular development or railway traffic and … to give full execution to the Colombo-motion of 27 January 1891 asking the Government to guarantee to national producers a regular demand [of locomotives]." ("mozione Ferraris", from the name of the proponent; Camera dei Deputati 1900, p. 1352).
To summarize, this brief account of the parliamentary debates on locomotives between 1885 and 1900 suggests that: i) the various forms of tariff protection were not believed to be sufficient; ii) the major problem faced by national producers was the irregularity over time of the demand for locomotives with sharp peaks followed by years of relative stagnation, preventing the regular and efficient scheduling of production plans; iii) a different policy-mix assigning greater weight to more direct forms of State intervention was urgently advocated.

The birth of the Ferrovie dello Stato (1905) and the new railways policy
The late nineteenth-century parliamentary debate on railways produced relevant effects in terms of actual economic policies. Immediately after the turn of the century, and much in line with the content of the Colombo-motion of 1891, the Government presented a plan concerning the acquisition of new rolling stock for the years 1900-1904. It was established that "the quantity, quality, and expenditure … [for new acquisitions] … will be agreed between the State and the operating companies". 30 Furthermore, during the same five year period, the Government provided the operating companies a grant (non-repayable fund) of 28 million lire, reinforcing thus his role of chief sponsor of the railway sector. 31 It has been noticed accordingly that "the railway plan of 1900 represented the greater State commitment towards railways up to the creation of the Ferrovie dello Stato in 1905" (Papa 1973, p. 50). Times were mature for the complete State management of the railway sector and calls for a general reshaping of the system -that is the complex set of relations between the State, the railway companies, and the producers of rolling stocks -gained increasingly momentum. Statements such as "We passed from an insufficient protection to an excessive one. … When the price differential between national and foreign producers reaches level well above 20 percent, as happened in recent years, the protection of the national industry constitutes a burden too heavy for the public budget …." became recurrent in the parliamentary debates. 32 The twenty-year contract between the State and the operating companies (the Railway Conventions of 1885) was, at this point, unsurprisingly, not renewed.
The rules of the game were ultimately changed in 1905 when the direct State management of the railway system started with the birth of the Ferrovie dello Stato (FS) a fully state-owned company. 33 On the one hand, the protection of the national industry was confirmed and even reinforced. On the other hand, a more rigorous expenditure policy was put in place: "The Government will assign the production of new rolling stock to national manufacturers … 30 Thus article 9 of law no. 57, February 27, 1900. 31 Thus article 1 of law no. 57, February 27, 1900. 32 The sentence in the main text refers to the parliamentary speech of April 19, 1905, by Deputy M. Ferraris (Camera dei Deputati 1905, p. 2605). 33 The framework of the new policy regime was established by law no. 137, April 1905 on "the public management of the railway sector", and by law no. 429, July 1907, on "the State management of railways not licensed to private firms". safeguarding, other things being equal, a fair distribution among the various producers" and "whenever necessary … the executive manager [of the newborn FS] can disregard open and national call and use private negotiations …", but importantly, "in case of collusive behavior or any kind of fraud by national manufacturers to the detriment of the railway administration [that is the FS], or when it will not be possible for national producers to guarantee a fair price of rolling stock, according to the prevailing market conditions, then … [the Government] … will order new rolling stock to foreign producers." 34 Two points deserve attention: i) the tool of direct procurements to assign orders to national producers was explicitly institutionalized, ii) the State intended to use international auctions as an external threat to prevent or at least limit national producers in their attempts to get the highest possible selling prices for their locomotives. 35 The actual effects of the new FS regime on locomotive acquisitions and related prices are illustrated in Tables 6 and 7. The tables set out quantity and price data as contained in the report of March 1906 to the Parliament by the Minister of public works Pietro Carmine (the so called "Carmine-report", Camera dei Deputati 1906a). Table 6 col. 2 shows that 291 locomotives were assigned to national producers by means of direct procurement contracts, and 112 to foreign producers of various European countries by means of international auctions. The evidence on prices reported in Table 6, col. 3 is more difficult to read. First of all, the average price agreed with national producers at the beginning of January 1906 (1.77 lire per kg, as reported in Table 6, Panel A, col. 3) represented the maximum level that the State was willing to pay. The actual price paid to national producers was computed by comparing a reference price with the average price of the best offers by foreign producers in the international auction held at the end of January 1906. 36 The reference price was computed as follows. An amount of 0.14 lire per kg, accounting for the tariff on imports of locomotives, was first deducted from the maximum level of 1.77 lire per kg. A further five per cent (to account for the five per cent clause introduced by the Railways Conventions of 1885) was then subtracted from the difference previously calculated. In mathematical terms, the reference price corresponds to 1.77 -0.14 -0.05*(1.77-0.14) = 1.77 -0.14 -0.08 = 1.55 lire per kg. 37 As anticipated, this is not however the end of the story. To decide the price actually paid to national producers, one has to compare the reference price of 1.55 lire per kg with the average price of the best offers presented by foreign producers. In this case, as illustrated in Table 6, Panel B, col. 3, this amount was equal to 1.56 lire per kg. Since the latter is higher than the reference price of 1.55 lire per kg previously 34 Thus article 11 of law no. 137, April 1905. For a critical view see Contento (1905), lamenting the excessive vagueness of the above article 11 when referring to ambiguous concepts such as "whenever necessary" and "fair price of rolling stock." The articles and books review section of the Quarterly Journal of Economics, 19, 4, August 1905, p. 663 summarizes Contento's article as follows: "Criticises a protectionist clause in the new State railway legislation, providing that home industries be favored in the purchase of supplies." 35 Direct procurement contracts were rarely used to import locomotives from abroad. The Minister of public works Carmine mentions for instance the case of "unusual" private negotiations with foreign producers concerning 25 locomotives (Camera dei Deputati 1906b, p. 6652). 36 As Camera dei Deputati (1906c, p. 13), and article 34 of Law 429 July 7, 1907 on the "State management of the railway sector" report, to evaluate the best offers of foreign producers one has to compute "the average of the lowest prices computed over a half of valid foreign offers. If the number of valid foreign offers is uneven, the average is computed by considering a half plus one." 37 The calculations concerning the reference price are reported in Camera dei Deputati (1906a, p. 5). calculated, no reduction was applied to the maximum level of 1.77 lire per kg agreed during the private negotiations with national producers. 38 A total of 291 locomotives were assigned to national producers by direct procurement contracts, and 112 to foreign producers though international auctions. Table 7 provides an assessment of the price gap between national and foreign manufacturers in 1906. It shows that by 1906 the price gap was only about 9 percent, significantly lower than in the 1885-1899 period. 39 After the turn of the century, with the birth of the Ferrovie dello Stato (FS), the good old times of high prices guaranteed to Italian producers by means private negotiations -compare Table 5, col. 5 and Table 7, col. 3 -seems to be memories of the past.
To summarize, with the creation of the FS in 1905, the State implemented a new policy mix capable to stimulate the national industry, by directly assigning to local producers new locomotive orders, and, at the same time, to safeguard the State budget by linking the price effectively paid to national producers to the best offers of foreign producers. Foreign purchases were used to investigate the price of locomotives and to absorb demand peaks such as occurred in 1907-1908 when about 900 locomotives entered the FS locomotive fleet.
As a final note, to put things in a broader perspective, Table 8, panel A provides a detailed account of government expenditure for the acquisition of various "heavy-engineering" products during the years from 1905 to 1912. Table 8, panel B sets out expenditure on rolling stock, shipbuilding, and artillery and weapons. The table, appended to the celebrated "esposizione finanziaria" of December 7, 1912 made by the Treasury Minister Tedesco to the Italian Parliament in the aftermath of the Italian-Turkish War, distinguishes between supplies by national and foreign producers.
While an in-depth analysis is clearly beyond the scope of this paper, three basic facts are however immediately evident. The first is that in an official document by the Treasury minister of the time railways are placed side by side with strategic activities such as the navy and the army. The second is that railways constituted a truly remarkable share of State expenditure (compare cols. 1+2 to cols 7+8). Finally, one may observe that the "national champions" policy was not limited to railways (compare cols. 1 and 2; 3 and 4; 5 and 6). In the light of the above evidence, the extensive State intervention in the railway sector during the belle époque can be 38 If the reference price happened to be greater than 1.55 lire per kg (say 1.59 lire per kg), then the maximum price previously agreed with national producers (necessarily greater than 1.77 lire per kg) would have been reduced by an amount corresponding to the difference (of 0.03 lire in this case) with the average best offers of foreign producers (1.56 lire per kg), Camera dei Deputati (1906a, p. 5). 39 The price ratio between national and foreign locomotives reported in Table 7 can be used to perform a tentative estimation of the total factor productivity (TFP) gap in steam locomotives production between Italy and Germany around 1906. We use the formula , / where A = TFP levels; W= real wages; R = rental cost of capital; C = raw materials and α, β, and γ are the shares of labor, capital, and raw material in total costs. The suffix * indicates the foreign country. Assuming that the rental cost of capital was the same in the two countries, using the data in Table 3 to estimate cost shares, data on real wages from Allen (2001), and on the price of iron (which approximates the raw materials) from Cianci (1933, pp. 329-30), one gets that the level of TFP in Italy was about 85 percent of the German level. Taking into account the crude nature of the data, the assumptions made, and that the extent to which the prices reported in Table 7 were subjected to political manipulation remains uncertain, these estimates provide only a very rough indication of the TFP gap between the two countries. also considered as part of Italy's attempt to take part in the "great power" politics that ultimately set the stage for the Great War.

Concluding remarks
Notwithstanding the limited endowment of the country in terms of engineering competences, the Italian steam locomotive industry achieved a level of technological sophistication in line with that of foreign producers by the beginning of the twentieth century. 40 The early development of the industry was slowed both by the vagaries of the demand which prevented the major national players from planning an ordered expansion of productive capacity and, secondly, by tariff protection on iron products, which resulted in a cost disadvantage. From 1885 onwards national manufacturers received considerable support through a discretionary procurement policy which in practical terms amounted to an effective "non-tariff barrier" and to a more regular demand for their products, tied to the spread of the railways network leading to greater economies of scale.
The design and construction of locomotives were probably among the most sophisticated segments of the nineteenth century mechanical engineering industry and it is instructive to compare the performance of the locomotive industry with other less sophisticated branches such as cotton textile machinery where the country was unable to develop any autonomous production (Besso 1910, pp. 142-43;A'Hearn 1998). Yet, there were also other complex engineering products in which Italy was also able to deliver a very good performance, such as the production of war-ships (Fenoaltea 2011, p. 150), some of which were even exported. This somewhat paradoxical outcome can be explained taking into account that some of the most sophisticated branches of the mechanical engineering could endure the negative effects of the tariff, by virtue of non-tariff trade barriers such as public procurement, subsidies, and other similar policies, whereas the less sophisticated branches had to bear its full burden. 40 This is also consistent with the evidence of Italian patenting activities in railway technologies in the US which reached a peak in the period 1900-1914. The Giollitian phase of "catching-up" was indeed characterized by a burst of Italian patenting activities in the US in other relatively sophisticated industries such as rubber and electrical equipment (Barbiellini Amidei, Cantwell, Spadavecchia 2013).

Appendix A: The steam locomotives dataset
The steam locomotives dataset is based on two major components. The first one is constructed with the same approach and sources used in Ciccarelli and Fenoaltea (2012) 1914. 43 The catalogues set out the technical characteristics of each type of locomotive in service together with a numerical identifier, the year of construction, and the name of the building company. Our dataset is constructed by merging the relevant quantitative information stored in these four publications.
The second component of the dataset concerns technical features. For each locomotive model (Gruppo FS) we have retrieved the information on locomotives' weight and power (measured in HP) from Cornolò (1998, pp. 584-99).
The WHP calculations presented in the previous Patterns of technical change section refer to 4,432 steam locomotives with separated tenders; the remaining 1,268 tank-locomotives (locomotives carrying water and coal on board instead of pulling them behind in a separated tender), with a WHP far higher and well above 100, are excluded. 44 Locomotives in our sample are grouped according to a classification scheme adopted by the Ferrovie dello Stato (FS) in 1905. Table A1 illustrates the distribution of locomotives in our sample by (104) locomotive groups. The table includes two panels. Panel A includes locomotive groups from 100 to 560; these are mostly of "first-generation" (i.e., using single expansion and saturated, or "wet" steam). Panel B refers to groups from 600 to 980, and includes mostly "second generation" locomotives (i.e., adopting super-heating and/or double-expansion). The table's columns are numbered as follows. Odd numbers refer to locomotive groups. Even numbers refer to the units of locomotives within a given group. Locomotive groups included in the same column are similar in terms of technical characteristics (speed, power, weight, wheels arrangement, etc.). The bottom part of Table A1, panels A and B report the average sample weight, the average sample power, and the power-to-weight-ratio evaluated at the sample average. 41 A complete account (in Italian) on sources and methods can be found in Ciccarelli and Fenoaltea (2014 Ferrovie dello Stato (1914). 44 We do not consider in our sample tank-locomotives because they are typically of reduced size and weight, and often operating in narrow gauge lines (Ministero dei lavori pubblici 1901, pp. 200-1, where the tank-locomotives are classified as a category apart, with an average price well below that of standard locomotives).

Appendix B. The evolution of the railways in Italy during the Liberal Age
The text provides a brief account of the evolution of the Italian railway network from its origins (1839, when the short trunk connecting Naples to Portici was opened) to the eve of WWI.
The Pre-Unitarian Period, 1839-1860 Camillo Cavour, the main architect of Italy's Unification, was a great supporter of railways, considering them as a source of civilization. His 1846 Des chemins de fer en Italie, written when he was member of Piedmont's parliament, had a certain resonance among European elites. 45 The 1846 Cavourian piece was mainly written against the Austrian plans for the future development of Northern Italy's railways (Lombardy and Venetia, including, of course, Trieste and its port, were then part of the Habsburg Empire). The Austrian policy aimed to strengthen the commercial relation between Wien and Trieste, and its port on the upper Adriatic sea, and, at the same time, to downsize Genoa's commercial ambitions, tied naturally to the development of its port in the upper Mediterranean sea. A few years later, as Prime Minister, Cavour was able to pursue effectively his ideas on railways and Italian unification. The opening in 1853 of the line connecting industrial Turin to Genoa and its port, represented the first achievement of his railway policy. In 1854, the "Sampierdarena"-the first 100-percent Italian steam locomotive, named after the place of production near Genoa-was produced by the new born Ansaldo factory. The development of an important engineering company in Genoa was part of the Cavourian project too.
In the pre-Unitarian period the extension of the railway network was limited and the system had an eminently local character as a result of the uncoordinated installation of railways by pre-Unitarian states. The railway lines were typically built by a large number of concessionaires. Numerous individual lines, of full or narrow gauges, were in private hands and the management of the network reverted to the State only in subsequent years. We refer the reader to Peter M. Kalla-Bishop (1971, pp. 11-30) for a more complete treatment of the early development of the railway network in pre-Unification Italy, and of the leading actors of the time-Cavour, Metternich, Pius IX, and, especially so, the Rothschilds.
The Post-Unitarian Period, 1861-1913 A useful point of departure to approach the study of the steam locomotive industry is the outline of the institutional evolution of the railway system in post-Unification Italy. In this respect, it is possible to distinguish four major phases (Cornolò, 1998): 46 (a) The Railways Conventions of 1865Conventions of (1865Conventions of -1876 The extension of the Italian network in 1864 amounted to some 3,850 kilometers. As a term of comparison, the situation elsewhere was the following: United States (56,000), United Kingdom (18,000), France (12,000 km), Germany (16,000), Austria (5,800), Spain (2,800), 45 Cavour (1846). On Cavour and early development of Italian railways see Einaudi (1938). 46 Fenoaltea (2011) suggests a somewhat different periodization, which is essentially based on the different waves of construction of the railway network, rather than on the institutional arrangements. A detailed account of the evolution of the Italian railways system can also be found in Crispo (1940) and Guadagno (1996). Russia (2,400), World (130,000). 47 A certain number of regions (including Basilicata, Calabria, and Umbria in mainland Italy, and the two big islands of Sicily and Sardinia) were in 1864 still without rails. After the country's Unification (1861), the law no. 2279 of 1865 established that four major private "franchise" firms should be appointed for the operation of the existing railway systems and for the construction of new ones. The companies to whom the Railway Conventions of 1865 entrusted the management of the network were:

(b) "Indirect" State Control (1876-1885)
This is a rather obscure phase in which, due to the financial difficulties of the "franchisee" companies, the State was forced to gradually take back their control. 50

(c) The Railways Conventions of 1885 (1885-1905)
After a decade of "indirect" State management (1876-1885) the system underwent a major reform in 1885, when the management of the vast majority of the railway network was assigned to three operating companies by means of a 20 year renewable contract. Two major ones, the Rete Adriatica (RA) and the Rete Mediterranea (RM), covered the peninsula along a west-east divide, and a third one, the Rete Sicula (RS), operated in Sicily. 51 (1905)(1906)(1907)(1908)(1909)(1910)(1911)(1912)(1913) Finally from 1905, at the end of the 20 year contract with the three operating companies previously mentioned, the railways system was directly managed by the State through the newborn Ferrovie dello Stato (FS) a fully public company. 52 Figure B1 illustrates the extension of Italy's railroads in selected years from 1861 to 1909. In 1861 there was no "national" network yet, although Milan and Ancona (on the Adriatic coast) were connected by a line passing through Bologna and other urban centers of the broad Po valley. A few years later, in 1866, the main trunks along the Tyrrhenian and Adriatic coastal plains were terminated. 53 The map for 1886 shows that the main inlands of Sicily and Sardinia had their own network, and that Calabria, in the toe of Italy's boot, was linked to Naples. In 1909, almost at the end of the period here considered, the vast majority of the network was built, and included a relevant numbers of lines crossing the Apennines, with gradients of a certain relevance requiring particularly powerful locomotives. After all, it has been noticed, "the familiar boot-shaped peninsula of Italy … is not particularly kind to railways on the ground." 54 52 According to Ministero dei lavori pubblici. Direzione generale delle ferrovie dello Stato (1906, p. 95), in July 1905 the newborn Ferrovie dello Stato inherited from the existing major companies a total of 2,664 locomotives (including the 1854 Sampierdarena). The company-by-company breakdown is as follows: 1,617 from the RM, 877 from the RA, and 170 from the RS. 53 The rapid network extension in the aftermath of the country's Unification (1861) had probably more to do with the necessity of rapidly moving the troops across the territory (to prevent or repress insurrections) than with economic reasons. 54 Kalla-Bishop (1971, p. 11 1850-1913 (units).

(d) The Creation of the Ferrovie dello Stato
Source: see text.  Source: see text. Source: see text. Source: see text. Source: see text. Final product: Steam locomotive 40,000 c 4.00 1,600.00 __________________________________________________________________________________ a Col. 4 = col 3 * col. 2. Once labor costs (21,974.45 lire) and transport costs (2,172.51 lire) are included, total costs amount to 53,752 lire. b col. 6 = col. 2 * col. 5 / 100. c The number of kilograms reported in the table (43,318 kg) refers to the weight of the inputs used to build a "standard" locomotive. Given the loss of weight of materials tied to the production process (called sfrido in the technical jargon) the final weight of the locomotive is of course lower than 43,318 kg. For the sake of simplicity, the sources typically omit to consider the sfrido.