Template-Type: ReDIF-Paper 1.0
Author-Name: Vincenzo Caponi
Author-X-Name-First: Vincenzo
Author-X-Name-Last: Caponi
Author-Email: vcaponi@ryerson.ca 
Author-Workplace-Name: Department of Economics, Ryerson University, Toronto, Canada
Title: Centralized Wage Determination and Regional Unemployment Differences: The Case of Italy 
Abstract: This paper presents a general equilibrium model of regional unemployment dispersion based on the Mortensen and Pissarides (1999) framework. The model economy presented here has centralized institutions, such as a single central government and central unions,
but regional labor markets with differences productivity. The model assumes that unions dislike wage dispersion across regions and the government dislikes population imbalance across the regions. The set up of the model is used to interpret the economic features of the Italian economy between the mid seventies and the end of the past century. By means of calibration using Italian data collected in the year 2000 the paper shows that the model economy explains the important regional dualism between the North and the South of Italy in terms of unemployment. Moreover, the model indicates that the interaction between unions and the government also generates low wage rates in the high productivity regions accompanied by low unemployment rates, even when the Northern worker is the median worker that determines the unions policies.
Classification-JEL: E240, J510, J600
Keywords: Italy, Regional Dualism, Mezzogiorno.
Length: 42 pages
Creation-Date: 2009-11
Number: 007
File-URL: http://economics.ryerson.ca/workingpapers/wp007.pdf
File-Format: Application/pdf
Handle: RePEc:rye:wpaper:wp007