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Investment, Productivity and Employment in the Italian Economy

In: The Economics of Imperfect Markets


  • Enrico Saltari

    (University of Rome)

  • Giuseppe Travaglini

    (Università di Urbino “Carlo Bo”)

  • Clifford R. Wymer

    (University of Rome)


This paper analyzes the effect of institutional structure, regulations, technological progress, and labor market flexibility on productivity in the Italian economy within the framework of the representative agent model of Saltari and Travaglini (2007). The core model is shown to be too restrictive to provide a good representation of the Italian economy. Broadening the view of the way in which firms take account of the costs of changing the labor force and investment achieves a more satisfactory representation of the dynamics of the productive sector of the economy while still retaining the spirit of the core model. Institutional or market structures, regulations, and other factors are incorporated in the system through modifications to the production function, the demand and supply functions for labor. A full-information, Gaussian estimator of a differential equation system is used throughout. As the constraints on the system arise from both macro-economic theory and the institutional structure of the Italian economy, this estimator provides a much more stringent test of all the hypotheses embedded in the model than many other studies. The model provides a foundation for a study of the extent to which, over time, changes in regulations or market structure might allow firms to reallocate resources to take better advantage of the skills available in the labor force within the context of a segmented labor market with varying efficiencies. The model lends itself to a policy analysis of the effects of these changes on the workings of the labor market as the ease with which firms may change their labor force determine the dynamics of the interaction between firms and labor and the path over time of labor and capital themselves.

Suggested Citation

  • Enrico Saltari & Giuseppe Travaglini & Clifford R. Wymer, 2010. "Investment, Productivity and Employment in the Italian Economy," Contributions to Economics, in: Giorgio Calcagnini & Enrico Saltari (ed.), The Economics of Imperfect Markets, chapter 0, pages 113-136, Springer.
  • Handle: RePEc:spr:conchp:978-3-7908-2131-4_7
    DOI: 10.1007/978-3-7908-2131-4_7

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    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Giuseppe Travaglini & Alessandro Bellocchi, 2018. "How supply and demand shocks affect productivity and unemployment growth: evidence from OECD countries," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 35(3), pages 955-979, December.
    2. Clifford R. Wymer, 2009. "Estimation of Continuous Time Models in Economics: an Overview," Working Papers - Dipartimento di Economia 7, Dipartimento di Economia, Sapienza University of Rome, revised 2009.
    3. Enrico Saltari & Clifford Wymer & Daniela Federici & Marilena Giannetti, 2011. "The impact of ICT on the Italian productivity dynamics," Working Papers in Public Economics 149, University of Rome La Sapienza, Department of Economics and Law.


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