Regional Wage and Productivity in Italy : A Spatial-Temporal Analysis

As known, Italy is characterized by a strong polarization between North and South and the 2007 crises has exacerbated such pattern. Most of the story is related to the regional labour market functioning. The paper investigates upon the functioning of Italian labour market at NUTS 2 level, over 1995-2015, by means of a panel error correction model after controlling for spatial interactions among Italian regions.Our results show that in the long run wage per worker follows a labour demand curve arising from a theoretical model of union bargaining, with a subsequent adjustment of short run dynamics to the long one. Hence wage are essentially driven by labour productivity. But regional characteristics matter, as residuals show a certain degree of cross dependence and presence of common factors. This means that regional disparities could be related to the local functioning of labour market and to productivity gap, that calls for the different industrial and institutional tissue among Italian regions