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Accounting for the Duality of the Italian Economy

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  • Fernández-Villaverde, Jesús
  • Laudati, Dario
  • Ohanian, Lee
  • Quadrini, Vincenzo

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

  • Fernández-Villaverde, Jesús & Laudati, Dario & Ohanian, Lee & Quadrini, Vincenzo, 2023. "Accounting for the Duality of the Italian Economy," CEPR Discussion Papers 18167, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:18167
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    Cited by:

    1. Jesús Fernández-Villaverde & Gustavo Ventura & Wen Yao, 2023. "The Wealth of Working Nations," PIER Working Paper Archive 24-002, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.

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    More about this item

    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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