Regional Labour Market Matching Functions and Efficiency Analysis

Abstract. Stochastic production frontiers are used for estimating regional matching functions where unemployment outflow is ‘produced’ by the unemployed and vacancies. The frontier is estimated using regional panel data from Finland from 1988 to 1997 and the Battese and Coelli frontier model, where the explanatory factors are included in the inefficiency term. The stochastic frontier matching function has constant returns, whereas in OLS estimation with fixed effects the returns are slightly increasing. Unemployment and vacancies in neighbouring regions have a spillover effect on efficiency. Excess job reallocation in a region deteriorates matching efficiency. The decomposition of total factor productivity change in matching to efficiency change and change in matching technology is also investigated by interpreting the matching frontier as a distance function and using Malmquist indexes. There is a downward trend in the technology, but short‐term variations are dominated by cyclical changes in efficiency.     

Labour Market Institutions and Flexibility in Italy

ABSTRACT: The paper surveys three broad categories of labor market institutions in Italy: employment protection legislation unemployment benefit systems and wage bargaining arrangements In each we the recent evolution and current state of Italian institutions are evaluated and compared With those in other major European countries     

University Quality and Labour Market Outcomes in Italy

Abstract. This paper uses proxies for university quality derived from Performance Indicators to evaluate the impact of university quality on the early labour market outcome of a cohort of recent Italian graduates. Institutional research quality is found to have a negative effect on the probability that both male and female graduates will be overeducated. Additionally, research inputs are positively related to men's wages. In contrast, teaching quality does not appear to enhance students’ economic success.     

Kind of Black: The Musicians' Labour Market in Italy

It is estimated that only 5 per cent of musicians in Italy are regularly employed. In an attempt at understanding such a peculiar situation, we build a theoretical model of the musicians' labour market in which we embed the main institutional features of the Italian system. The presence of taxation encourages the formation of a black labour market for musicians and discourages talented agents from becoming full‐time musicians in all second‐best economies. In Italy both tendencies are particularly strong, and exacerbated by the peculiarities of the pension system for musicians. These inefficiencies might be corrected by a twofold policy: the reform of the pension system, highly desirable but unlikely to be politically feasible in the current Italian institutional setting, and the introduction of a sufficiently large unemployment benefit for musicians, step that has a general interest for any second‐best economy and not only for the case of the musicians' labour market, and that might instead be viable under certain circumstances.     

Population Ageing and the Labour Market: Evidence from Italy

Individual data from eight waves of the European Community Household Panel are used to investigate the impact of cohort size on age‐earnings and employment profiles of Italian male workers. Evidence that over the life cycle cohort size depresses employment opportunities of men with low education and earnings and employment rates of men with intermediate and high qualifications born into large cohorts is found. These results are used to carry out a simple simulation where the average future wages of Italian male workers are projected for the next 4.5 decades. According to this simulation, the wages of Italian male workers will follow a hump‐shaped pattern in the next three decades, before slightly increasing again.     

The Labour Market in Macedonia: A Labour Demand Analysis

Abstract. This paper examines the labour market in Macedonia, a country with the highest unemployment rate in Europe. I describe labour market institutions and policies during the transition. I also examine job creation and job destruction using firm‐level data and I estimate short‐term and long‐term elasticities of the labour demand. The analysis shows that there are regulatory barriers to the labour market flexibility. I can also conclude that the privatization of socially owned enterprises has failed to promote job creation. Nevertheless, labour market problems seem to stem from factors other than substantial sluggishness of firms in adjusting employment to variations in wages.     

The Principal Statistical Sources for the Labour Market in Italy

ABSTRACT: The state of disequilibrium which the labour market in Italy (as in all the major industrialised countries) presents, has been the centre of debate in political and economic circles for many years now. How should this disequilibrium be interpreted, considering the complexity of the phenomena found in the labour area? Can they be modeled into global explanatory schemas of general economic theory? The authors believe the complexity of these phenomena can neither be ignored nor simplified, but accepted as a distinguishing feature of the labour market, and thus have to be interpreted on the basis of numerous and often contradictory control variables. This paper hence outlines the principle sources of Italian labour market data available, in order to provide a rational and critical guide to interpreting the available indicators. The sources examined are both institutional (the ISTAT and Ministry of Labour surveys) and private (the employers associations of Confindustria, Assolombarda and Federmec-canica). The paper outlines the areas covered, the methodology, and the qualities and drawbacks that these surveys present.     

Crime and Labour Market Opportunities in Italy (1993–2002)

Abstract. This paper investigates the relationship between labour market conditions and crime in Italy accounting for both age and gender in the unemployment measure and considering regional disparities between the North‐Centre and the South of Italy. Using regional data over the period 1993–2002, we study the impact of wages and unemployment on different types of crime. To mitigate omitted variables bias, we control extensively for demographic and socio‐economic variables. Empirical results suggest that unemployment has a large and positive effect on crime rates in southern regions. Our results are robust to model specification, endogeneity, changes in the classification of crimes, and finally, to alternative definitions of unemployment.     

Labour Mobility in Italy: An Empirical Investigation

ABSTRACT: In this paper the author presents a model of unemployment inflows and outflows for the Italian labour market. The flows that the author attempts to estimate are the unemployment inflows and outflows from and to employment. The aggregate estimation suggests that a crucial role is played by the aggregate demand and wage variables, and by the structural change variable. The paper also presents intersectoral estimations of SURE, which take into consideration the flows between Industry and Services. The results are along the lines of those obtained at the aggregate level. An important factor which should be underlined, however, is the asymmetric pattern of the wage variable in the industrial and services sector.     

Labour Market Structures,Labour Market Policy and Wage Formation in the OECD

This paper investigates why the incentive to moderate wages in an environment of rising unemployment differs so strongly among the OECD countries. In the first part we develop an insider-outsider bargaining model in which the wage results from a confrontation of the insiders' wage claims and the employer's wage offer. The second part of the paper empirically tests the model's predictions for the determinants of wage flexibility. The degree of centralization of wage bargaining, the extent of active labour market policy and the characteristics of the unemployment benefit system are shown to be relevant determinants.     

Trade and Labour Markets: Vertical and Regional Differentiation in Italy

The labour market misfortunes of the less skilled and rapid growth of international trade in manufactured goods with less advanced countries are linked by the paradoxical observation that trade theorists are in the forefront of those denying the importance of trade in income distribution. This paper analyses this conclusion by stressing the importance of vertical differentiation of trade flows and regional differentiation of skills in order to identify labour market effects of trade integration. Vertical and regional differentiation in trade and labour markets are analysed for a country, Italy, where these two elements seem to play a crucial role. The results show a likely displacement effect on unskilled labour due to trade flows with less advanced countries. Given the characteristics of Italian trade and labour markets, a stronger trade‐induced displacement effect on demand for unskilled labour takes place in the North of the country. Thus the vertical differentiation in Italian intra‐industry trade is a warning against understating the effect of trade on labour markets if product heterogeneity is not adequately considered. The regional differentiation of skill intensity is another warning against understating the effect of trade on labour markets whenever cross‐sectoral effects and the change in relative specialization are not adequately considered.     

Labour Market and Labour Market Policy in the Eastern Part of Germany: New Approaches and New Links to Structural Policy

ABSTRACT: After unification, East German GNP dropped severely, total employment fell to about two thirds of the former level. Long-term labour market prospects remain poor. From the very beginning up to now, labour market policy (short-time work, early retirement schemes, work creation measures, further training and retraining) absorbed much of the surplus labour supply. Regulations were changed to allow for‘“mega-measures” (contrasting the traditional individual approach). A new co-financing model links work-creation measures more closely to regional structural policy. A labour market infrastructure was built up in a short time, including new elements such as‘“employment promotion companies” and‘“reconstruction agents“.     

A Structural Approach to the European Labour Market

The structure of the European labour market is highly differentiated by geo-graphical area. If the 1992 integration is likely to induce short-medium term adjustment effects on employment, these will mostly affect regional labour markets. Negative adjustments will follow different distribution patterns, probably exacerbating current regional disequilibria. On the other hand, still little known are the geographical features of the European economic, social and production structures. Although many studies have recently concentrated on the analysis of local labour markets, few of them have addressed the issue of Community regions. Through multivariate and cluster analyses of structural data on regional labour markets, the paper offers a confirmation of the explanatory power of local market analysis, as applied to the European area. The structural features of each elementary area are captured by three factors only that allow the construction of a coherent classification of EEC regions in four major clusters. This classification is used to identify the “weak areas” that, after a reconsideration in unified terms of European cooperation policies, should be the object of new development interventions.     

Labour Legislation and Institutional Aspects of the Brazilian Labour Market

Abstract. This paper analyses the structure of the Brazilian Labour Code (CLT), the changes introduced since its approval in 1943, emphasizing the new Federal Constitution of 1988, the costs of labour and of dismissals for employers, the structure of union organizations, the regulation of collective bargaining and capital labour conflicts, and the process of wages determination. We also analyze the evolution of strike activity, and the evolution of wage differentials and functional distribution of income between profits and wages in industry in the last 15 years.     

Labour Market and Decentralized Decision-making: An Institutional Approach

The persistent failure in the labour market is due to uncertainty and asymmetric information, and relies on a reconsideration of the bargaining process. This process is not generated by individual action but rather by the behaviour of social groups and institutions in which State intervention can immprove the efficiency in matching demand and supply. In this framework we will discuss the ways by which institutional decentralization can be implemented in a labour market characterized by deep regional differences and by long-term unemployment persistence as in Italy. The main conclusion is that this policy option better fits the active labour policies. In fact the actual aim of such supply-side policies is to reduce the regional and skill mismatches and therefore it needs a substantial involvement of local public agencies.     

Enrolment in Labour Market Training Programmes

ABSTRACT: The specification of a model for selection to labour market training is studied. Based on present value maximization, it is demonstrated that frequently adopted specifications of wage equations yield selection models containing a difference between alternative wage rates paid in the training period. In addition, the training effect on future wage rates can be sign determined. Using this, we test the hypothesis of present value maximization. A test that is robust against omitted variables and heteroskedasticity is used. Based on a sample of unemployed Swedish workers, we find positive training effects for most sub-groups.     

Unemployment Stigma and Multiple Labour Market Equilibria: A Social-Psychological Interpretation of Hysteresis

ABSTRACT: This paper supplements a simple one period non-shirking efficiency wage model with behavioural assumptions drawn from the social-psychological literature. A model of social interaction is developed in which the status associated with various labour market options yields implications for the shape of the non-shirking constraint and, thereby, for the number and type of labour market equilibria. The significance of such a finding for the existence of unemployment hysteresis is explored.     

Benchmarking Labour Market Performances and Policies

The recent EU initiatives on employment policy and the “Luxembourg employment strategy” underscore the relevance of benchmarking as an instrument for improving labour market performance and labour policy effectiveness. This paper presents the major results of a research project aimed at exploring the application of benchmarking techniques to convergence between the European labour markets. After synthetically describing the development of benchmarking techniques in the private and the public sectors, the paper addresses the crucial question of defining labour market performance and presents the possibility of creating labour market performance and policy benchmarks through the construction of efficiency frontiers. A second possibility explored is the radar-chart approach, a presentation technique that allows both for single dimension and overall performance monitoring. The paper then faces the problem of broadening the scope of benchmarking from the identification of benchmarks to the understanding of performance gaps through more comprehensive analytical tools. In this area, useful contributions are provided by the employment systems and the transitional labour markets approaches. The concluding section stresses the role of normative decisions, as well as the possible political challenges implied by a thorough application of benchmarking techniques to labour market convergence.     

A Stock-Flow Model to Analyse and Forecast Labour Market Variables

ABSTRACT: In confronting problems of employment and unemployment, students of the labour market, and economists in general have focused mainly on the determination of the level of such variables. Much less attention has been paid to such questions as: how many persons have entered the area of employment and the labour force in various time periods, and how many have exited; their sex and age distribution; and the determinants of the level and structure of flows amongst the various labour market conditions. Yet it appears superfluous to underscore the relevance of such questions. To illustrate, suffice it to recall that in Italy, the present level of employment is essentially the same today as it was in 1961‘; but this has not prevented whole generations of young people from 'stably’entering the employment area, albeit with varying degrees of difficulty in different periods. As for the numerous statistical surveys of labour market flows in a range of countries, and as for the works of job search theorists², it should be observed that such surveys and analyses essentially concern conjunctural phenomena. Consequently, these authors have paid no attention to the distinction between short-run turnover and generational turnover, or to the extremely singular characteristics of the statistical data on flows. An attempt to construct labour market models that present an integrated version of the 'structural’aspects of the market in terms of stock and flows is therefore lacking. The present study sets forth various objectives and is divided into two parts. In the first, an analysis of several controversial terminological aspects of the concepts of stock and flow is presented, and an attempt is made to point out those theoretical structures which have been responsible for the long-prevailing neglect of the labour market flows, particularly long-run flows. Then the problem of defining the concepts of short-run and generational turnover will be confronted in light of an analysis of the statistical methods used in the surveys; finally, a methodology for measuring generational flows is proposed. In the second part of the paper a model based on generational flows, as previously defined, will be presented together with a computational procedure capable to produce long run estimates of alternative scenarios of labour demand and supply and of the structure of employment by sex and age. A brief summary of some of the empirical results obtained applying our model and forecasting procedure to the Italian labour market will also be discussed in the final part of the paper.     

Transitions in the Labour Market: Discouragement Effect and Individual Characteristics

The present work analyses the unemployment gender gap in Italy for the period 2004–11. We present a methodology for decomposing the natural rate of unemployment, thus defining it in terms of equilibrium labour market flows between the aggregate states of the labour market (Employment, Unemployment, Inactivity). In addition, we offer estimates of the determinants of the unemployment gender gap to pinpoint the relative role of individual characteristics and structural factors in determining this difference.