Agglomeration and growth: the effects of commuting costs

We present a model of industrial location and endogenous growth with congestion costs. According to the interplay between knowledge spillovers and commuting costs, we are able to obtain both a Krugman-type and a bell-shaped agglomeration outcome. In the first case, the economy experiences a permanent income inequality in the steady state and income divergence in the transitional dynamics. In the second case, we observe an enlargement of the industrial core of the economy with a strong catching up by the periphery. Welfare analysis shows that congestion create (in the bell-shaped agglomeration case) a negative welfare effect on peripheral unskilled workers and renders the agglomerated equilibrium Pareto inferior to dispersion.Congestion, Endogenous Growth, Migration

Immigrant earnings in the Italian labour market

The aim of this paper is to assess the relationship between individual skills and labour market performance of immigrants residing in Lombardy during the period 2001-2005. We use a recent dataset collected by the NGO ISMU, which includes information on individual characteristics and the legal status of each immigrant. Our results show that returns on schooling are positive and range from 0.8 per cent to 0.9 per cent, a figure that is much lower than the one estimated for native Italians. This result is robust to a number of specifications and tests. In particular, it is not influenced by the legal status of the alien or by a possible self-selection in the labour supply. Moreover, although more talented immigrants tend to self-select in the Lombardy region compared with the other Italian regions, their return on schooling remains low compared with natives. We also show that a certain heterogeneity exists across educational levels and countries of origin: immigrants from Eastern Europe are better able to exploit their human capital, especially when they hold a university degree, while the school-wage profile of Latin Americans and Asians is basically flat. Finally, there is some evidence of a cohort effect in migration, but this tends to impact on the return on experience rather than on the return on schooling.Immigration, return on schooling, return on experience

Skills or culture? An analysis of the decision to work by immigrant women in Italy

Activity and employment rates for immigrant women in many industrialized countries display a great variability across national groups. The aim of this paper is to assess whether this well-known fact is due to a voluntary decision (i.e. large reservation wages by the immigrants) or to an involuntary process in that the labour market evaluation of their skills is low. This is done by estimating the reservation wages for each individual in the dataset. Our results show that low activity and employment rates for certain national groups are not associated with high reservation wages. This implies that low participation should not be interpreted as a voluntary decision.Reservation wages, female labour supply, cross-national differences

Policies for local development: an evaluation of Italy's "Patti Territoriali"

In Italy, Patti Territoriali (Territorial Pacts) are one of the main government-sponsored programmes to foster growth in disadvantaged areas. A territorial pact is an agreement among the local authorities and representatives of civil society (mainly entrepreneurs and trade unions) of a number of neighbouring municipalities that is subsequently endorsed by the central government. It consists in a fully-fledged development plan, including a series of private and public investments for which public funding is provided. This paper evaluates the effectiveness of territorial pacts by comparing the economic performance, in terms of employment and number of plants, of participating municipalities with a sample of municipalities not involved in the policy. The results suggest that the programme has been largely ineffective in stimulating growth.regional aid, regional growth, ownership

Skill-Biased Share-Altering Technical Change in Spatial General Equilibrium

The paper consider the skill-biased “share-altering†technical change hypothesis in a spatial general equilibrium model where skilled and unskilled individual may exhibit different preferences for local amenities. A main novelty –both for labour and urban economics- is that, under this hypothesis, skill-biased technical change can be readily represented by simple Cobb-Douglas production functions, rather than CES technologies. We then analyse the local labour markets equilibrium, where the adoption of new technologies may require an adequate proportion of skilled workers. Keywords: skill-biased technical change, share-altering technologies, local labour markets. JEL Classification Numbers: O33, R12, R23, J31.

Skill Polarization in Local Labour Markets under Share-Altering Technical Change

This paper considers the “share-altering” technical change hypothesis in a spatial general equilibrium model where individuals have different levels of skills. Building on a simple Cobb-Douglas production function, our model shows that the implementation of skill-biased technologies requires a sufficient proportion of highly educated individuals. Moreover, areas that experiment this kind of technical change will initially exhibit a rise in local skill premia, but such a trend tends to be reverted over time due to labour mobility. Also, when technical progress is such to disproportionately replace middle-skill jobs, the local distribution of skill will exhibit “fat-tails”, where the proportion of both highly skilled and low-skilled workers increases. These predictions are consistent with recent existing evidence.share-altering technologies, local skill distribution, local wage premium.

Skills or culture? An analysis of the decision to work by immigrant women in Italy

Activity and employment rates for immigrant women in many industrialised countries display a great variability across national groups. The aim of this paper is to assess whether this fact is due to a voluntary decision (i.e. large reservation wages by immigrants) or to an involuntary process (i.e. low labor market evaluation of their skills). This is done by estimating the reservation wage for each individual in a sample of immigrant women in Italy. Our results show that low activity and employment rates for certain national groups are not associated with high reservation wages. This implies that low participation should not be interpreted as a voluntary decision

Judiciary efficiency and trade in tasks

In this paper, we study how contract enforcement at the local level affects a firm's ability to supply customised intermediate inputs to foreign firms. Using Italian firm-level data, we show that firms located in courts with higher judicial trial length in civil disputes, which is our measure of contract enforcement, are less likely to supply customised inputs to foreign firms. The effect is stronger in contact-intensive sectors. In our empirical exercise we take advantage of two important characteristics of the Italian legal system. First, law determines the courts for disputes. This corresponds to the court where the plant is located. Trial length varies from less than one year in the most efficient court to more than seven years in the least efficient one. We observe large heterogeneity despite the fact that law should be uniformly applied over the country. Second, the Italian law codifies a specific contract type for the supply of customised intermediate inputs (contratto di subfornitura). This contract is widely used in the Italian context (Lazerson, 1999). In our data, firms report if they supply intermediate inputs to foreign customers under this type of contract. We deem it to be a very good approximation of the firm-to-firms relations in a Global value chain. We find that, when firms are located in inefficient courts, the probability to supply intermediate inputs abroad decreases. The effect are stronger for firms that operate in industries that are contract intensive. Following Nunn (2007), for each industry we measure contract intensity as the share of products that are not sold on organised markets according to the Rauch (1999) classification. We find that a standard deviation increase in trial length decreases the probability to supply customised inputs by 1.7 to 3 percentage points in industries at the 25th and 75th percentile of contract intensity, respectively

Skill-Biased Share-Altering Technical Change in Spatial General Equilibrium

The paper consider the skill-biased "share-altering" technical change hypothesis in a spatial general equilibrium model where skilled and unskilled individual may exhibit different preferences for local amenities. A main novelty - both for labour and urban economics- is that, under this hypothesis, skill-biased technical change can be readily represented by simple Cobb-Douglas production functions, rather than CES technologies. We then analyse the local labour markets equilibrium, where the adoption of new technologies may require an adequate proportion of skilled workers

Global Value Chains and the Great Recession: Evidence from Italian and German Firms

During the last two decades, profound changes in the international division of labour among firms have occurred, with impressive growth in outsourcing, off-shoring of some stages of production and the globalization of intermediates goods markets. This new model of the international division of labour has both initiated an increasing variety of relationships among producers and spurred the development of Global Value Chains. According to some recent research, Global Value Chains have been one of the main transmission mechanisms of the Great Trade Collapse that severely and simultaneously hit all OECD countries in 2009. Pervasive as it has been, it also appears that the impact of the crisis on firms involved in Global Value Chains has been highly heterogeneous. Our paper intends to contribute to this very recent and ongoing debate, providing a description of the effects of the crisis from a perspective that is both countrycomparative, Germany and Italy being the countries taken into consideration, and on firm level, as we pay particular attention to the positioning of the firms along Global Value Chains, i.e., whether intermediate or final firms- and to their strategies. Three are the main conclusions: i) intermediate firms were hit by the crisis more than final firms; ii) among intermediate firms, the ones that carried out innovation activities in the previous period (before 2008) were somewhat sheltered by the effect of crisis; iii) firms ’ positioning in GVCs and their strategies may help to explain the Italy-Germany performance gap