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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.

Suggested Citation

  • Claudio Lupi & Giorgio Brunello, 2001. "Beyond National Institutions: Labor Taxes and Regional Unemployment in Italy," CESifo Working Paper Series 414, CESifo.
    • Handle: RePEc:ces:ceswps:_414
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    References listed on IDEAS

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    Cited by:

    1. Juan F. Jimeno & Diego Rodríguez-Palenzuela, "undated". "Youth unemployment in the OECD: Demographic shifts, labour market institutions, and macroeconomic shocks," Working Papers 2002-15, FEDEA.
    2. repec:ebl:ecbull:v:10:y:2002:i:2:p:1-8 is not listed on IDEAS
    3. Giorgio Brunello & Maria Laura Parisi & Daniela Sonedda, 2002. "Labor Taxes and Wages: Evidence from Italy," CESifo Working Paper Series 715, CESifo.
    4. Juan F. Jimeno & Diego Rodríguez-Palenzuela, "undated". "Youth unemployment in the OECD: Demographic shifts, labour market institutions, and macroeconomic shocks," Working Papers 2002-15, FEDEA.
    5. Andrea Festa, 2014. "Tax relief, tax wedge and regional employment: evidence from Italy," European Journal of Law and Economics, Springer, vol. 38(1), pages 117-137, August.

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    Keywords

    Regional unemployment; labor taxes;

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