Seminario di Emanuele Ciani

ore 12.30 Sala Seminari – I° piano, Palazzo Levi Cases, Via del Santo 33

17.01.2017

Local Labor Market Heterogeneity in Italy: Estimates and Simulations Using Responses to Labor Demand Shocks

Seminario di Emanuele Ciani, Bank of Italy

Using different sources of data from Italian local labor markets (LLMs) between 1971 and 2011, the paper documents a number of stylized facts: a) the local differences in private employment to population rates are highly persistent; b) population shows a limited reaction to labor demand shocks, in line with the high rigidity of nominal wages and pro-cyclical variations in rents, which absorb the gains (losses) from higher (lower) employment rate; c) labor demand shocks are quite persistent and unevenly distributed, affecting those areas that were already lagging behind and boosting those that were more advanced; d) shocks are also amplified by the non-linearity of the employment adjustment, which reacts more to negative shocks than to positive ones. The estimated reactions to the shocks are then used to perform policy-motivated simulations. We find that allowing greater population reactions seems to be a superior policy option. If Italy had experienced the population reactivity of the US, local disparities would have significantly reduced, as much as what would have happened with a sizable intervention in lagging behind areas.