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Beyond National Institutions: Labor Taxes and Regional Unemployment in Italy

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  • Claudio Lupi
  • Giorgio Brunello

Abstract

By focusing on the Italian experience, we ask whether the relationship between labor taxes and unemployment varies across regions. In spite of similar national labor market institutions, we show that this relationship is significantly stronger in the highly industrialized North than in the under-developed South, where unemployment is much higher. An important source of variation in the regional responsiveness of unemployment originates from the fact that regional gross wages in the North increase more than in the South in response to a hike in labor taxes. Regional wage setting affects regional employment (and unemployment) both directly and indirectly, via its impact on regional profits and the capital stock.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2001/wp-cesifo-2001-01/cesifo_wp414.pdf
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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 414.

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Date of creation: 2001
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Handle: RePEc:ces:ceswps:_414

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Keywords: Regional unemployment; labor taxes;

References

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  1. Fitoussi, J-P & Jestaz, D. & Phelps, E.S. & Zoega, G., 2000. "Roots of the Recent Recoveries : Labor Reforms or Private-Sector Forces ?," Documents de Travail de l'OFCE, Observatoire Francais des Conjonctures Economiques (OFCE) 2000-04, Observatoire Francais des Conjonctures Economiques (OFCE).
  2. Alberto Alesina & Silvia Ardagna & Roberto Perotti & Fabio Schiantarelli, 2002. "Fiscal Policy, Profits, and Investment," American Economic Review, American Economic Association, American Economic Association, vol. 92(3), pages 571-589, June.
  3. Pedroni, Peter, 1999. " Critical Values for Cointegration Tests in Heterogeneous Panels with Multiple Regressors," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(0), pages 653-70, Special I.
  4. Ours, J.C. van & Nickell, S.J., 2000. "The Netherlands and the United Kingdom: A European unemployment miracle?," Open Access publications from Tilburg University urn:nbn:nl:ui:12-84119, Tilburg University.
  5. Blanchard, Olivier & Wolfers, Justin, 2000. "The Role of Shocks and Institutions in the Rise of European Unemployment: The Aggregate Evidence," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 110(462), pages C1-33, March.
  6. Christopher Pissarides, 1997. "The impact of employment tax cuts on unemployment and wages : the role of unemployment benefits and tax structure," LSE Research Online Documents on Economics, London School of Economics and Political Science, LSE Library 2332, London School of Economics and Political Science, LSE Library.
  7. Francesco Daveri & Guido Tabellini, . "Unemployment, Growth and Taxation in Industrial Countries," Working Papers 122, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  8. Ordine, Patrizia, 1995. "Wage drift and minimum contractual wage: Theoretical interrelationship and empirical evidence for Italy," Labour Economics, Elsevier, Elsevier, vol. 2(4), pages 335-357, December.
  9. Brunello, Giorgio & Lupi, Claudio & Ordine, Patrizia, 2001. "Widening differences in Italian regional unemployment," Labour Economics, Elsevier, Elsevier, vol. 8(1), pages 103-129, January.
  10. Albert Alesina & Stephan Danninger & Massimo Rostagno, 2001. "Redistribution Through Public Employment: The Case of Italy," IMF Staff Papers, Palgrave Macmillan, vol. 48(3), pages 2.
  11. Corneo, Giacomo & Lucifora, Claudio, 1997. "Wage formation under union threat effects: Theory and empirical evidence," Labour Economics, Elsevier, Elsevier, vol. 4(3), pages 265-292, September.
  12. Stephan Danninger & Alberto Alesina & Massimo V. Rostagno, 1999. "Redistribution Through Public Employment," IMF Working Papers 99/177, International Monetary Fund.
  13. Stephen Nickell, 1997. "Unemployment and Labor Market Rigidities: Europe versus North America," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 11(3), pages 55-74, Summer.
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Cited by:
  1. Juan F. Jimeno & Diego Rodríguez-Palenzuela, 2003. "Youth Unemployment in the OECD: Demographic Shifts, Labour Market Institutions and Macroeconomic Shocks," Economics Working Papers, European Network of Economic Policy Research Institutes 019, European Network of Economic Policy Research Institutes.
  2. Giorgio Brunello & Maria Laura Parisi & Daniela Sonedda, 2002. "Labor Taxes and Wages: Evidence from Italy," CESifo Working Paper Series 715, CESifo Group Munich.
  3. Juan F. Jimeno & Diego Rodríguez-Palenzuela, . "Youth unemployment in the OECD: Demographic shifts, labour market institutions, and macroeconomic shocks," Working Papers 2002-15, FEDEA.
  4. repec:ebl:ecbull:v:10:y:2002:i:2:p:1-8 is not listed on IDEAS

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