Local labour market heterogeneity in Italy: estimates and simulations using responses to labour demand shocks
Emanuele Ciani (),
Francesco David () and
Guido de Blasio ()
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Francesco David: Bank of Italy
No 1112, Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area
Using different data sources from local labour markets (LLMs) in Italy between 1971 and 2011, we document a number of stylized facts: a) local differences in the ratios of private employment to population are highly persistent; b) the population has a limited reaction to labour demand shocks, consistent with the high rigidity of nominal wages and pro-cyclical variations in rents, which absorb the gains (losses) from higher (lower) employment rates; c) labour demand shocks are fairly persistent and unevenly distributed, to the detriment of those areas that were already lagging behind and boosting the more advanced ones; d) shocks are amplified by the non-linear employment adjustment, which reacts more to negative shocks than to positive ones. The estimated reactions to shocks are then used to perform policy-motivated simulations. We find that allowing greater population reactions is a superior policy option. Had Italy experienced the population reactivity of the US, local disparities would have been significantly less, to the same extent as with a sizeable public intervention in areas lagging behind.
Keywords: local labour markets; labour demand; shocks. (search for similar items in EconPapers)
JEL-codes: J23 J61 R23 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eur, nep-lma and nep-ure
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