Taking as a starting point the evidence of growing disparities for most of the 1984-2007 period, this article investigates the nature of regional unemployment in Italy. In particular, we assess whether the Italian regional unemployment rates contain a unit root and are, thus, subject to pure hysteresis, considering as alternative hypotheses both a linear and a non-linear stationary process. For that purpose, we employ three recently developed panel unit-root tests, taking account of structural breaks, cross-section dependence and non-linearities. Contrary to previous studies in the literature, our results reject the pure hysteresis hypothesis and support the characterisation of regional unemployment in Italy as a stationary but non-linear process, subject to multiple equilibria, in line with the 'structuralist hypothesis' advanced by Phelps (1994).
The nature of regional unemployment in Italy
LANZAFAME, Matteo
2010-01-01
Abstract
Taking as a starting point the evidence of growing disparities for most of the 1984-2007 period, this article investigates the nature of regional unemployment in Italy. In particular, we assess whether the Italian regional unemployment rates contain a unit root and are, thus, subject to pure hysteresis, considering as alternative hypotheses both a linear and a non-linear stationary process. For that purpose, we employ three recently developed panel unit-root tests, taking account of structural breaks, cross-section dependence and non-linearities. Contrary to previous studies in the literature, our results reject the pure hysteresis hypothesis and support the characterisation of regional unemployment in Italy as a stationary but non-linear process, subject to multiple equilibria, in line with the 'structuralist hypothesis' advanced by Phelps (1994).Pubblicazioni consigliate
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