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The sources of unemployment fluctuations: an empirical application to the Italian case

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  • Fabiani, Silvia
  • Locarno, Alberto
  • Oneto, Gian Paolo
  • Sestito, Paolo

Abstract

The paper attempts at disentangling the main sources of the rise in the Italian unemployment rate over the last four decades on the basis of a small model a la Layard-Nickell, identified and estimated using a structural VAR approach. Unemployment movements are assumed to be driven by fully permanent and long-lived but temporary shocks. The component of unemployment related to current and lagged demand shocks deriving from the sVAR estimation is found to be relevant and quite persistent, its swings accounting for approximately a 4 percentage points change in the unemployment rate. In particular, while temporary by construction, this component shows an almost continuous increase since the beginning of the 1980s. Nonetheless, the results confirm that the bulk of the rise in Italian unemployment is to be attributed to non-demand factors: temporary (namely productivity and labour supply shocks) and fully permanent (namely shocks to the wage bargaining schedule). The latter explain a gradual rise of about 2.5 percentage points between the end of the 1960s and the beginning of the 1980s; over the last 15-20 years, however, they do not seem to have further contributed to the worsening of unemployment situation. JEL Classification: C51, E24, J60
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Suggested Citation

  • Fabiani, Silvia & Locarno, Alberto & Oneto, Gian Paolo & Sestito, Paolo, 2001. "The sources of unemployment fluctuations: an empirical application to the Italian case," Labour Economics, Elsevier, vol. 8(2), pages 259-289, May.
  • Handle: RePEc:eee:labeco:v:8:y:2001:i:2:p:259-289
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    References listed on IDEAS

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    1. Blanchard, Olivier Jean & Quah, Danny, 1989. "The Dynamic Effects of Aggregate Demand and Supply Disturbances," American Economic Review, American Economic Association, vol. 79(4), pages 655-673, September.
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    12. Fabiani, Silvia & Locarno, Alberto & Oneto, Gian Paolo & Sestito, Paolo, 2001. "The sources of unemployment fluctuations: an empirical application to the Italian case," Labour Economics, Elsevier, vol. 8(2), pages 259-289, May.
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    15. Silvia Fabiani & Alberto Locarno & Gian Paolo Oneto & Paolo Sestito, 1997. "NAIRU: Incomes Policy and Inflation," OECD Economics Department Working Papers 187, OECD Publishing.
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    1. ¿Empleo y/o salarios?
      by Samuel Bentolila in Nada Es Gratis on 2013-07-16 10:55:07

    Citations

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    Cited by:

    1. Francesco Pastore, 2010. "Assessing the impact of incomes policy: the Italian experience," International Journal of Manpower, Emerald Group Publishing, vol. 31(7), pages 793-817, October.
    2. Bergvall, Anders & Forsfält, Tomas & Hjelm, Göran & Nilsson, Jonny & Vartiainen, Juhana, 2007. "KIMOD 1.0 Documentation of NIER´s Dynamic Macroeconomic General Equilibrium Model of the Swedish Economy," Working Papers 100, National Institute of Economic Research.
    3. Luis Eduardo Arango & Ana María Iregui & Luis Fernando Melo, 2003. "Recent Behavior of Output, Unemployment, Wages and Prices in Colombia:What went Wrong?," Borradores de Economia 249, Banco de la Republica de Colombia.
    4. Fabiani, Silvia & Locarno, Alberto & Oneto, Gian Paolo & Sestito, Paolo, 2001. "The sources of unemployment fluctuations: an empirical application to the Italian case," Labour Economics, Elsevier, vol. 8(2), pages 259-289, May.
    5. Holmlund, Bertil & Alexius, Annika, 2008. "Monetary Policy and Swedish Unemployment Fluctuations," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy (IfW), vol. 2, pages 1-25.
    6. repec:ksp:journ3:v:1:y:2015:i:4:p:256-274 is not listed on IDEAS
    7. Fabiani, S. & Palenzuela-Rodriguez, D., 2001. "Model-Based Indicators of Labour Market Rigidity," Papers 57, Quebec a Montreal - Recherche en gestion.
    8. Luis Eduardo Arango & IREGUI, Ana María & MELO, Luis F., 2006. "Recent macroeconomic performance in colombia: what went wrong?," REVISTA DE ECONOMÍA DEL ROSARIO, UNIVERSIDAD DEL ROSARIO, June.
    9. Hjelm, Göran & Jönsson, Kristian, 2010. "In Search of a Method for Measuring the Output Gap of the Swedish Economy," Working Papers 115, National Institute of Economic Research.
    10. Tafirenyika Sunde & Olusegun A. Akanbi, 2016. "Sources of unemployment in Namibia: an application of the structural VAR approach," International Journal of Sustainable Economy, Inderscience Enterprises Ltd, vol. 8(2), pages 125-143.
    11. Ralf Brüggemann, 2006. "Sources of German unemployment: a structural vector error correction analysis," Empirical Economics, Springer, pages 409-431.
    12. Francesco Devicienti & Agata Maida & Paolo Sestito, 2007. "Downward Wage Rigidity in Italy: Micro-Based Measures and Implications," Economic Journal, Royal Economic Society, vol. 117(524), pages 530-552, November.
    13. Tafirenyika SUNDE, 2015. "The effects of monetary policy on unemployment in Namibia," Journal of Economic and Social Thought, KSP Journals, vol. 2(4), pages 256-274, December.

    More about this item

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J60 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - General

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