Does labour respond to cyclical fluctuations? The case of Italy

Abstract

The aim of this paper is to analyse whether labour mobility is likely to act as a sufficient adjustment mechanism in the face of asymmetric shocks in Italy. In particular, the paper examines if the interregional migration responds, among other factors, also to the GDP's regional cyclical component. The results show that interregional labour mobility appears to respond adequately to current and past cyclical fluctuations.

Acknowledgements

I would like to thank Sara Borelli, Barry Chiswick and Georgios Karras for the useful comments. I, alone, am responsible for any errors.

Notes

¹ See for example Decressein and Fatás (1995), Eichengreen (1993).

² For a more detailed discussion see Chiswick and Miller (2002).

³ With this parameter of smoothness we obtain a cyclical component comparable with that obtained by the BP filter. See Ravn and Uhlig (2002) for a more detailed discussion.

⁴ Correlation equal to 0.99.

⁵ Step-wise regression suggests to include in the model the GDP at t−2 and not t−1. However, this variable captures the response of migration to long-run forces, thus, including one or the other variable does not matter from a theoretical point of view.

⁶ This is rather obvious given that different detrending methods determine cyclical fluctuations with different width.