Local Labour Market Heterogeneity in Italy: Estimates and Simulations Using Responses to Labour Demand Shocks

50 Pages Posted: 8 May 2017

Date Written: May 3, 2017

Abstract

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

JEL Classification: J23, J61, R23

Suggested Citation

Ciani, Emanuele and David, Francesco and de Blasio, Guido, Local Labour Market Heterogeneity in Italy: Estimates and Simulations Using Responses to Labour Demand Shocks (May 3, 2017). Bank of Italy Temi di Discussione (Working Paper) No. 1112. Available at SSRN: https://ssrn.com/abstract=2964819 or http://dx.doi.org/10.2139/ssrn.2964819

Emanuele Ciani

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Francesco David

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Guido De Blasio (Contact Author)

Bank of Italy ( email )

Via Nazionale 91
00184 Roma
Italy

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