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Accounting for the Duality of the Italian Economy

Author

Listed:
  • Jesús Fernández-Villaverde
  • Dario Laudati
  • Lee Ohanian
  • Vincenzo Quadrini

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.

Suggested Citation

  • Jesús Fernández-Villaverde & Dario Laudati & Lee Ohanian & Vincenzo Quadrini, 2023. "Accounting for the Duality of the Italian Economy," CESifo Working Paper Series 10470, CESifo.
    • Handle: RePEc:ces:ceswps:_10470
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    References listed on IDEAS

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    2. Giovanni Iuzzolino & Guido Pellegrini & Gianfranco Viesti, 2011. "Convergence among Italian Regions, 1861-2011," Quaderni di storia economica (Economic History Working Papers) 22, Bank of Italy, Economic Research and International Relations Area.
    3. Anton Cheremukhin & Mikhail Golosov & Sergei Guriev & Aleh Tsyvinski, 2017. "The Industrialization and Economic Development of Russia through the Lens of a Neoclassical Growth Model," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 84(2), pages 613-649.
    4. Toniolo, Gianni (ed.), 2013. "The Oxford Handbook of the Italian Economy Since Unification," OUP Catalogue, Oxford University Press, number 9780199936694.
    5. Zamagni, Vera, 1997. "The Economic History of Italy 1860-1990," OUP Catalogue, Oxford University Press, number 9780198292890.
    6. Wolf, Nikolaus & Rosés, Joan R., 2018. "Regional Economic Development in Europe, 1900-2010: a description of the Patterns," CEPR Discussion Papers 12749, C.E.P.R. Discussion Papers.
    7. Eckaus, Richard S., 1961. "The North-South Differential In Italian Economic Development," The Journal of Economic History, Cambridge University Press, vol. 21(3), pages 285-317, September.
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    9. Hollis B. Chenery, 1962. "Development Policies for Southern Italy," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 76(4), pages 515-547.
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    Cited by:

    1. Jesús Fernández-Villaverde & Gustavo Ventura & Wen Yao, 2023. "The Wealth of Working Nations," NBER Working Papers 31914, National Bureau of Economic Research, Inc.

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    More about this item

    Keywords

    Italian economy; macroeconomic wedges; regional fiscal redistribution; regional convergence;
    All these keywords.

    JEL classification:

    • E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General

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