Accounting for the Duality of the Italian Economy

43 Pages Posted: 8 Jun 2023

See all articles by Jesús Fernández-Villaverde

Jesús Fernández-Villaverde

University of Pennsylvania - Department of Economics; National Bureau of Economic Research (NBER)

Dario Laudati

University of Southern California

Lee E. Ohanian

University of California, Los Angeles (UCLA) - Department of Economics; National Bureau of Economic Research (NBER)

Vincenzo Quadrini

University of Southern California - Marshall School of Business - Finance and Business Economics Department; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: 2023

Abstract

After 162 years of political unification, Italy still displays large regional economic differences. In 2019, the per capita GDP of Lombardia was 39,700 euros, but Calabria’s per capita GDP was only 17,300 euros. We build a two-region, two-sector model of the Italian economy to measure the wedges that could account for the differences in aggregate variables between the North and the South. We find that the largest driver of the regional disparity in per capita output is the difference in total factor productivity, followed by fiscal redistribution. These two factors, together, account for more than 70 percent of the output disparity between the North and the South.

Keywords: Italian economy, macroeconomic wedges, regional fiscal redistribution, regional convergence

JEL Classification: E100, E600

Suggested Citation

Fernández-Villaverde, Jesús and Laudati, Dario and Ohanian, Lee E. and Quadrini, Vincenzo, Accounting for the Duality of the Italian Economy (2023). CESifo Working Paper No. 10470, Available at SSRN: https://ssrn.com/abstract=4470390 or http://dx.doi.org/10.2139/ssrn.4470390

Jesús Fernández-Villaverde

University of Pennsylvania - Department of Economics ( email )

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National Bureau of Economic Research (NBER)

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Dario Laudati

University of Southern California ( email )

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Lee E. Ohanian

University of California, Los Angeles (UCLA) - Department of Economics ( email )

Box 951477
8283 Bunch Hall
Los Angeles, CA 90095-1477
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Vincenzo Quadrini (Contact Author)

University of Southern California - Marshall School of Business - Finance and Business Economics Department ( email )

Marshall School of Business
Los Angeles, CA 90089
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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