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Regional Adjustment to Employment Shocks: Italy 1960-1994

  • Marco Leonardi

    (Centre of Economic Performance, LSE London)

In this paper I study the dynamic response of regional variables to employment shocks in Italy 1960-94. Considering an univariate model I find low persistence of the regional unemployment rate in deviation from the national mean. This confirms previous results (Eichengreen 1992) and suggests that some other mechanisms besides migration are at work to restore regional labour market equilibrium in Italy. Using multivariate VAR analisys we obtain that movements in partecipation rather than in migration of workers explain the low persistence of regional relative unemployment in the average Italian region. Wage response to employment shocks has very mild effects on employment and migration dynamics. Adjustment dynamics are very different in the North and the South. The southern regions show a very persistent unemployment and very low interregional migration in response to employment shocks. The lack of interregional migration in the South could be an explanation of the growing gap in unemployment rates between North and South, at least for the part not due to changes in regional natural rates.

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File URL: http://dipeco.economia.unimib.it/repec/pdf/mibwpaper16.pdf
File Function: First version, 1997
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Paper provided by University of Milano-Bicocca, Department of Economics in its series Working Papers with number 16.

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Length: 32 pages
Date of creation: Dec 1997
Date of revision: Sep 1998
Handle: RePEc:mib:wpaper:16
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  1. Eswar Prasad & Tamim Bayoumi, 1996. "Currency Unions, Economic Fluctuations, and Adjustment; Some New Empirical Evidence," IMF Working Papers 96/81, International Monetary Fund.
  2. Bayoumi, Tamim & Eichengreen, Barry, 1992. "Shocking Aspects of European Monetary Unification," CEPR Discussion Papers 643, C.E.P.R. Discussion Papers.
  3. Krugman, Paul & Venables, Anthony J, 1993. "Integration, Specialization and Adjustment," CEPR Discussion Papers 886, C.E.P.R. Discussion Papers.
  4. Krugman, Paul, 1991. "History versus Expectations," The Quarterly Journal of Economics, MIT Press, vol. 106(2), pages 651-67, May.
  5. Paul Krugman, 1990. "Increasing Returns and Economic Geography," NBER Working Papers 3275, National Bureau of Economic Research, Inc.
  6. De Grauwe, Paul & Vanhaverbeke, Wim, 1991. "Is Europe an Optimum Currency Area? Evidence from Regional Data," CEPR Discussion Papers 555, C.E.P.R. Discussion Papers.
  7. Decressin, Jörg & Fatás, Antonio, 1994. "Regional Labour Market Dynamics in Europe," CEPR Discussion Papers 1085, C.E.P.R. Discussion Papers.
  8. Helg, Rodolfo & Manasse, Paolo & Monacelli, Tommaso & Rovelli, Riccardo, 1995. "How much (a)symmetry in Europe? Evidence from industrial sectors," European Economic Review, Elsevier, vol. 39(5), pages 1017-1041, May.
  9. Eichengreen, B., 1992. "Should the Maastricht Treaty be Saved?," Princeton Studies in International Economics 74, International Economics Section, Departement of Economics Princeton University,.
  10. Damien NEVEN & Claudine GOUYETTE, 1993. "Regional Convergence in the European Comunity," Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) 9311, Université de Lausanne, Faculté des HEC, DEEP.
  11. Paul Krugman & Anthony Venables, 1993. "Integration, Specialization, and the Adjustment," NBER Working Papers 4559, National Bureau of Economic Research, Inc.
  12. Topel, Robert H, 1986. "Local Labor Markets," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages S111-43, June.
  13. Bayoumi, Tamim & Eichengreen, Barry, 1992. "Shocking Aspects of Monetary Unification," Department of Economics, Working Paper Series qt791143kp, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  14. Olivier Jean Blanchard & Lawrence F. Katz, 1992. "Regional Evolutions," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 23(1), pages 1-76.
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