Giornale degli Economisti

In this paper the evolution of labour productivity and TFP is anlysed for the Italian regions at the sector level over the period 1980-2004 using growth accounting techniques. The results sugges that the decline in productivity after 1995 has been widespread across sectors and regions, although in southern Italy the decline has been weaker; in turn, TFP growth seems to have been the major responsible for both the decline of labour productivity growth and for explaining regional labour productivity growth differentials. The estimation of a TFP growth model inspired to be the Neo-Shumpeterian Growth Theory suggests that a key role in driving the different pattern in TFP growth between northern and southern regions may have been played by catching up processes, as regions that were far away from the technological frontier, mainly located in the south, have displayed faster TFP growth. The econometric results also suggest that spillover effects, R&D and, to a lesser extent, human capital may have been important drivers of the rate of innovation over the sample period. 

In this paper, we analyse the process by which the decisions of a regulated local public utility, in terms of productive efficiency and quality of the service provided, impact on prices of final consumption goods, supplied in a oligopolistic market operating in the sae geographic area. The regulation rules we consider are twofold: a Price-Cap mechanism and a Minimum Quality Standard constraing, both largely applied in the practice of public utilities regulation in industrialised countries. In particular in Italy these rules are applied in water and waste collection services. We obtain some formula for these effects which can be quantified by estimating firms' conditional input demand function of the public service and firms' inverse demand function for this public good, non-rival, component. Finally, we draw the effects of productive efficiency and quality on consumer welfare via changes on tariffs, external effects and final goods prices.

I review the literature concerning the determinants of yield spreads on government bonds. Due to the large attention received in the literature, I will refer to European and emerging markets. Europe has undergone significant institutional changes over the last decade and the corresponding market has become increasingly integrated. The value of bonds issued by emerging economies has reached high levels in the 1990's with important implications for the operation of international capital markets. This survey provides an extensive overview of the most recent explanations for the observed yield spreads on sovereign bonds.

 

In this paper we examine the features of the US wage Phillips curve over different time horizons analyzing the original Phillips’ specification on a scale-by-scale basis with data transformed by wavelet and band-pass filtering methods. Our results provide compelling evidence that the wage Phillips curve relationship is frequency-dependent, i.e. it varies across frequency bands. In particular, estimation results over frequency bands beyond the business cycle horizon, where the variables have large coefficient values, are very highly significant and explain a substantial proportion of the total variation of nominal wage changes, suggest that the medium-run may be a correct time frame for the wage Philips’ relationship.

Under the classical linear regression model assumptions, fixed effects estimates properly control for time-invariant unobservables and produce unbiased estimates. However, they often rely on limited data variability and present high standard errors. We present an innovative methodology that complements longitudinal data with other sources of unpaired data to increase estimation efficiency. The methodology assumes that the are no time varying unobservables correlated with the observables and with the fixed effects. We apply the methodology to three sets of Leaving Standard Measurement Study data from Nicaragua and estimate a household consumption model. We find that, if the correlation between observables and unobservables does not vary across time, our methodology has the potential to lead to unbiased and more efficient estimates.

We investigate the relationship between living standards and fertility, using a three-wave panel dataset from Indonesia to provide information on women’s fertility histories and the levels of consumption expenditure in the households to which they belong. We adopt a Bayesian approach to estimation and exploit the dynamically recursive structure implied by gestation lags to identify causal effects of living standards on fertility and vice versa.

This paper analyzes the effect of Employment Protection Legislation (EPL) on the conversion rate of temporary contracts into permanent ones in the same firm. Once EPL is enforced, two effects might arise: employers could tend to replace their permanent workforce with short-term employment because of the lower expected value of a filled job, but firms might also prefer to stabilize part of their temporary workforce both to reduce the uncertainty of costly job-breakups and to increase the matching surplus. Which of these two effects is dominant is ultimately an empirical question, and we exploit a natural experiment yielded by the Italian 1990 reform which introduced unjust dismissal costs for small businesses to identify the effect of EPL on the conversion rate of working and training contracts (Contratti di formazione e lavoro - CFL) into permanent ones in the same firm. We find that more stringent EPL acts positively on the conversion rates, and that the estimates remain similar for different robustness checks.

This paper focuses on changes in the Italian labour market over the decade 1993-2003. We estimate both aggregate transition matrices and micro-level multinomial logistic regression models to analyse flows between labour market states and their determinants. We aim to assess whether labour market intervention and regulation introduced in the nineties acted in the expected direction, that is helping disadvantaged categories such as women and the young. We find that, at least as far as our analysis goes, this has not been the case.

This paper investigates the reasons that determine students’ mobility in Italy and tries to explain why in the presence of quality differentials among universities the majority of students choose to remain in their regions of origin. We find that low mobility is related to family income and other financial and background characteristics. Low mobility in turn implies the existence of little competition among universities, and hence little incentive for improvement in either teaching or research. A crucial issue is therefore to evaluate if and how the government may affect this process and improve the supply of higher education quality and the degree of competition among academic institutions.

This study investigates inflation perceptions, and their relationship with factors likely to affect them, through a survey of a representative sample of Italian consumers. The results show that reported inflation is, on average, much higher than measured by official statistics. Inflation perceptions are higher for women, the unemployed and less educated individuals, as well as for consumers with some forms of financial distress. A very low knowledge of the inflation concept and related statistics and an inaccurate memory of past prices turn out to play a significant role in explaining the highest class of perceptions. These results suggest that when consumers express their opinions on what they report as “inflation”, they are incorporating a complex combination of forces that go well beyond the phenomena measured by official inflation statistics.

Since February 2003 ISAE collects quantitative inflation opinions, within its monthly survey on Italian consumers. Data confirms the severe overestimation of inflation already emerging from a companion study on Italian consumers (Del Giovane, Fabiani and Sabbatini, 2009); moreover, quantitative replies are in line with more traditional qualitative evaluations derived from the same survey, indicating that overestimation is not a random outcome resulting from casual answers. A first explanation calls for inadequate knowledge of inflation statistics: however, scarce information does not explain per se overestimation. Indeed, overestimation varies across personal characteristics and it is strongly correlated with assessments on economic conditions, those being more optimistic generally showing lower inflation opinions. It is possible that with a scarce statistical knowledge the consumers attribute to high inflation an “economic distress” mainly determined by slow growth of disposable income and psychological factors linked to socio-economic circumstances.

The paper surveys and appraises the recent research on informational cascades and herding behaviour in capital markets. Standard models of informational cascades hardly apply to capital markets where all publicly available information is reflected in the price and investment decisions are continuous. The paper briefly describes the situations in which an informational cascade may take place also in the context of financial markets and offers a critical review of both empirical evidence and experimental results.

Using daily data for the euro area, the paper estimates demand equations for reserves held by commercial banks at the central bank. The presence of the expected overnight rate among the regressors allows to gauge the announcement effect, the ability by the central bank to influence the current overnight rate without resorting to open market operations, e.g. via the announcement of an official interest rate change, or a speech by one of its top executives. The estimated semi-elasticities to the current and expected rate have opposite signs and are very similar in absolute value. This implies that central bank statements affecting the expected overnight rate trigger an arbitrage mechanism whereby the current rate moves in the same direction and by the same amount, leaving the market for liquidity in equilibrium without any need for the central bank to resort to liquidity management. The equations are also used to gauge the liquidity effect, the reaction of short-term interest rates to a monetary base shock.

Despite the reforms of recent years, the development of pension funds in Italy remains unsatisfactory, limiting workers’ retirement saving and hampering the capital market. This study analyzes the reasons for the lag, examines the potential benefits of supplementary pension schemes for workers, and considers possible policy measures to foster their growth.

During the first half of the 1990s a pool of Italian judges carried out an investigation, named Mani Pulite (literally clean hands), that led many public officials to be prosecuted and convicted because of corruption. We show that Mani Pulite broke down the perverse linkage between corruption and public spending which characterized the Italian economy previously.

Building on my discussion of the paper by Daveri - Jona-Lasinio (2005) on Italy’s economic decline, I first enlarge the perspective of their key findings by considering developments in the US and the European economy. Moreover, I take a different perspective that hinges on the literature on productivity and business cycle, providing theoretical and empirical arguments that lend support to alternative views. This pertains especially to the role of reallocation effects in aggregate productivity and the link between market liberalization and productivity dynamics.

"Sunto di alcuni capitoli di un nuovo trattato di economia pura del Prof. Pareto," Giornale degli Economisti, [2], 20 (March, June 1900), 216-235, 511-549

Pareto, V. "Le equazioni dell'equilibrio dinamico," Appendix (pp. 253-259) to the article "Le nuove teorie economiche: Appunti," Giornale degli Economisti, [2],23 (September 1901)

Pareto, V. "Di un nuovo errore nello interpretare le teorie dell'economia matematica," Giornale degli Economisti, [2],25 (November 1902), 401-433

Pareto, V. "A proposito del massimo di ofelimità," Giornale degli Economisti, [2],26 (February 1903), 177-178

Pareto, V. "Economia Sperimentale," Giornale degli Economisti e Rivista di Statistica, 28(57), (July 1918), 118

Pareto V. (1892) "Di un errore del Cournot nel trattare l'economia colla matematica," Giornale degli economisti e Annali di economia, vol. 2 (4), febbraio 1892 : pp.154-162

Pareto V. (1892) "Dell'utile che procurano al paese le ferrovie," vol.2(4), febbraio 1892: 154-162

Pareto V. (1892) "La teoria dei prezzi dei Signori Auspitz e Lieben e le osservasioni del professore Walras," Giornale degli economisti, vol.2(4), March : 201-239 and "Ancora della Teoria des Preises dei Signori Auspitz e Lieben," ibid., vol.2(5),  August: 168

Pareto V. (1893) "La mortalità infantile ed il costo dell'uomo adulto," Giornale degli economisti, novembre: 451-456.

"Teoria matematica dei cambi forestiere," Giornale degli Economisti [2], 8 (February 1894), 142-173.

"Il massimo di utilità dato dalla libera concorrenza," Giornale degli Economisti [2],9 (July 1894), 48-66

"Teoria matematica del commercio internazionale," Giornale degli Economisti [2],10 (April 1895), 476-498

Edgeworth, F.Y. "Supplementary Notes on Statistics," Journal of the Royal Statistical Society, 59 (September 1896), Parts II and III (pp. 533-534), and Parts I and II of the Appendix (pp. 537-539)

Pareto, V, "The Income Curve and Professor Edgeworth's Observations," Giornale degli Economisti [2],13 (November 1896), 439-448

Edgeworth, F.Y "La curva delle entrate e la curva di probabilità," Giornale degli Economisti, [2],14, (March 1897), 215-218

Pareto, V, "Ultima risposta al prof. Edgeworth," Giornale degli Economisti [2],14 (March 1897)

Pareto, V. "Aggiunta allo studio sulla curva delle entrate," Giornale degli Economisti, 14 (January 1897), 15-26

The papers in this issue were presented in an earlier version at the Third Conference on New Issues in Economic Policy, jointly organized by the Giornale degli Economisti (GdE) and by the “Ente Luigi Einaudi per gli Studi Monetari, Bancari e Finanziari” (EE). The conference was held in Rome, on September 21, 2007, kindly hosted by the Bank of Italy. The papers have gone through the normal refereeing process under the supervision of the editorial board.

Ensuring adequate living standards to a growing number of elderly while restraining the growth of pension spending represents the main challenge for Italian pension policy. There is a need for an in-depth analysis of the economic conditions of the elderly which in order to target resources to the more needy groups. Using micro-data from the Bank of Italy Survey of Household Income and Wealth (SHIW), we document that the incidence and intensity of poverty among pensioners in Italy are far below those concerning other citizens. This is mainly attributable to the generous rules which governed, until very recently, the public pension system. However, the economic conditions of pensioners vary a lot with age, gender, region and family characteristics. Some groups present high poverty risks. Moreover, the pension reforms implemented since 1992 will curb the benefits paid to younger generations, which also suffer from relatively low wages and increased job flexi-bility. As a result, for such cohorts the poverty risk after retirement has sharply risen. Changes in the social insurance pension schemes can mitigate some of these risks, but the goal of poverty reduction should be primarily pursued through other expenditure programs.

Studi di settore (Sds) can be seen as a procedure that is midway between mechanisms
of audit selection and methods of normal taxation. Its impact depends both on the efficiency
of the audit selection criteria as well as on the strength of the political compromise
that is built-in. This paper has three purposes. The first is to construct a simple
model of the firm’s choice under Sds. The second is to use the model to discuss the stylized
facts emerging from the implementation of Sds in the period 1998-2004. The third
is to provide some policy indications to evaluate recent amendments to Sds.

In this paper we analyse the affordability of water and energy for Italian households. We first document how the regulatory reform has changed the system of price setting, illustrating the dynamics of utility prices and of household expenditure in the period 1998-2005. We then discuss current indices adopted to measure the affordability of public utilities and propose an alternative one, in order to investigate how many households would incur a potentially excessive burden, if they consumed a minimum quantity of utility services. Finally, we calculate the values of these indices on data from the ‘Survey on Family Budgets’ over the period, and use them to depict the affordability issue in Italy. Our results show that after the Italian reforms of the Nineties (at least until 2005) the affordability of public utility services has not worsened.

Local public services have been the object of a significant reform process since the beginning of the 1990s. The effects of the measures are uniformly considered unsatisfactory. In the paper we provide some evidence – partly based on new ad-hoc surveys – on the degree of implementation of the reforms an their effects and analyse the reasons behind the poor results. We claim that both the institutional design of the reforms and implementation issues are responsible for the limited effects in terms of separating planning and regulatory duties from service provision; reducing thr fragmentation of the industries; reducing the reliance of these sectors upon (centrally funded) public subsidies.

Like those of the previous issue, the papers published in this issue resulted from our January 2007 call for papers offering theoretical, empirical, and institutional analyses of education supply and demand in Italy. Accepted submissions were presented at a workshop in May 2007, sponsored by the PRIN 2005 “Institutional configuration, schooling choices, and labor and financial markets” (“Assetto istituzionale, scelte scolastiche, e mercati del lavoro e finanziari”) research project funded by MIUR, and kindly hosted by Fondazione Luigi Einaudi di Torino. Full drafts of selected papers, revised on the basis of discussion at the workshop, were subject to the journal’s anonymous refereeing process with the aim of ensuring not only the factual accuracy of final drafts, but also their conformity to international professional standards of academic research.

In this paper we investigate the existence and the size of geographical differences in Italian students’ mathematical competencies. We analyze a novel data set that combines the 2003 wave of the OECD Programme for International Student Assessment (PISA) with information about local economic conditions and school-level administrative data. We find there is significant positive correlation, across provinces, between mathematical literacy and school buildings maintenance and local employment probabilities. About 75% of the North-South differential in mathematical literacy is accounted for by resource differences, while geographical differences in school production functions account for the remaining fraction.

This paper examines teachers’ labour market in Italy. Quality and motivation of teachers are receiving large attention as crucial determinants of pupils’ achievement. These char- acteristics are difficult to measure as testified by the lack of data. To overcome these dif- ficulties we look at the composition of teachers’ pool and to their behaviour in the mar- ket in a first attempt to infer some information about their quality and motivation. We show that Italian teachers have traits and behaviour that are consistent with an implicit contract in which relatively low wages are compensated by low involvement in the job and low effort exerted. Next we look at the institutional features that might have moti- vated this implicit contract. In particular we examine the mechanism that allocates teach- ers to schools. For each school we construct three indicators; one indicating the level of turnover that we interpret as source of turmoil with potentially negative implications for pupils’ achievement; one that refers to the mismatch between tenured teachers and their school; the third indicator measures the quality of the school as evaluated by the whole population of tenured teachers and thus we name it “revealed preferences indicator”. We show that the geographical and across school distribution of these three indicators re- semble that of perceived quality of the schools. While we do not attempt to identify, in any econometric sense, the causal link of these indicators with students performance, we do measure the association at the school level of our indicators with pupils achievement as provided by PISA 2003. It appears that our indicators are strongly correlated to the school’s performance, negatively to the turnover and to the mismatch indicator, positively to the revealed preferences expressed by the whole population of teachers. It seems that teachers know which are the best schools and gradually attempt to move there.

Private school enrolment may lead to worse subsequent performance in further education or in the labour market. If students differ in their ability not only to pay but to take advantage of educational opportunities (“talent” for short), private schools attract a worse pool of students when publicly funded schools are better suited to foster progress by more talented students. In the data we analyze, the impact of observable talent proxies on educational and labour market outcomes is indeed more positive for students who (endogenously) choose to attend public schools than for those who choose to pay for private education.

This paper quantifies the extent and the main characteristics of child work in Italy during the years 1881-1961. From population censuses, we created a new database of the economically active population aged 10-14 by gender, region, and economic sector. We find that child work incidence declined sharply over time, from 64.3 percent in 1881 to 3.6 percent in 1961. This pattern holds true both nationally and within regions. The new body of evidence we provide casts serious doubts on international comparisons which portray post-war Italy as a country with peculiarly high employment rates for children. Our findings also challenge the view that the initial phases of industrialization had a negative impact on the living standards of Italian children. We show that, in the case of Italy, industrialization coincided with a decline in the employment of children. Our analysis of the determinants of child work suggests that (i) changes in the allocation of total active population among productive sectors explain only a small amount of changes in the employment of children; (ii) changes in labor and compulsory- schooling legislation indicates that the impact of institutions on child labor was modest until the late 1930s. Overall, the increasing GDP per head was probably the main, but not the only, driving force behind declining child work incidence.

All countries’ education systems feature competition between suppliers under private or public control, coexistence of academic and professional tracks, financially-constrained choices by households, and more or less generous and differentiated funding of educational establishments. These and other features have important long-run implications for the level and dispersion of cognitive ability and productivity across individuals, and for labor market outcomes.

The paper analyzes the characteristics of the supply of higher education in different geographical macroareas using a strategic interaction framework. We investigate the issue of educational quality differentials in a centralized funding system. In the presence of moving costs and asymmetric information on individuals ability, we show that only highability students acquire education and the quality of education is lower in macroareas where the moving costs are higher in the only perfect Bayesian equilibrium consistent with forward induction. Our model predicts that direct subsidies to universities may be ineffective in improving the quality of education in the less developed areas. When regional disparities are not too large, efficiency can be increased by subsidizing student mobility.

Using data in which individual risk aversion is measured from answers to a lottery ques- tion, I investigate if (and to what extent) parents’ risk aversion and wealth can explain secondary schooling choices of young Italians. The question is relevant because the type of secondary school is likely to affect accession to college and the future performance in the labor market. I find that risk aversion has no effect on the choice of secondary school while family wealth is significantly positively associated to the choice of “Liceo”. OLS and IV estimates show that parents’ wealth has a significantly larger effect in liq- uidity constrained families (4% of the sample). This finding points to the necessity of introducing schooling grants at lower levels of schooling.

The aim of the present paper is to gain some insight into the causes of dropping out of school and, more generally, of the factors that induce parents to review their choic- es about their child’s schooling careers. To this end we apply to data from a school dropout survey insights from a model of sequential decision making by parents, where the initial decision can be reviewed in the light of new information emerging about the ability and opportunities of the child in benefitting from education relative to her alternative (in the unskilled labour market). Analysis of the data confirms that both the economic capacity (opportunity costs) and the cultural capacity (ability to disen- tangle signals about future opportunities) of the family of origin shape observed choic- es about drop-out and return to school by individuals in our sample. Dropping out be- haviour also appears to be strongly influenced by mismatches between school and stu- dent, however, and many of those who leave are not “gone for good.”

To provide empirical evidence on differences across high school tracks in early occupa- tional labour market outcome, I estimate how the employment probability, the time be- fore the first job is taken up, and earnings depend on high school type, controlling for student characteristics by a propensity score matching “average treatment on the treat- ed” estimation method. I find that technical education enhances employment probabil- ity and shortens the time to get the first job, and also to a less extent increases early earn- ings. These results indicate that, for those youths going on the labour market immedi- ately after high school, technical education is better than other educational tracks in terms of early labour market outcomes three years after graduation.

This special issue collects a selection of papers that were presented at the second Italian Conference on Econometrics and Empirical Economics (Rimini, 25-26 January 2007) - ICEEE. ICEEE is organized every two years by CIDE, a consortium of Italian econometricians, and aims to provide a forum for discussion of high quality research papers in both theoretical and empirical econometrics. The 2007 conference programme consisted of around one hundred papers, selected by the scientific committee out of over two hundred submissions. Giornale degli Economisti contributed to the success of ICEEE in two, distinct ways: it provided financial support for the Carlo Giannini Prize, and an outlet for timely publication of empirically oriented papers by ICEEE authors.

This paper focuses on the choice between aggregate and disaggregate models, consisting of both univariate and multivariate specifications, in predicting aggregate variables. A formal hypothesis testing procedure for in-sample model selection is suggested. The empirical size and power of the test are investigated via the use of Monte Carlo simulations. Empirical results show that the test has good performance not only when the competitive models are non-nested specifications, but also when considering nested competitors.

Default rates on instalment loans vary with type of the good purchased. Using an Italian dataset of instalment loans between 1995-1999, we first show that the variation persists even after controlling for contract and individual-specific characteristics, and for the potential selection bias due to credit rationing. We explore whether the residual variation in default rates across different types of goods is due to unobserved individual heterogeneity (selection effect) or due to the effect of the specific characteristics of the good (good effect). We claim that the two effects may be interpreted as adverse selection and moral hazard. We exploit the data on multiple contracts per individual to disentangle the two effects, and find that both contribute to the residual variation. The selection effect, however, is more prevalent: individuals who buy motorcycles on credit are more likely to default on any loan, while those buying kitchen appliances, furniture and computers are more likely to repay, compared to average. The good effect is present only for two goods: new cars, which increase the incentive to repay, and mobile phones, which reduce it. We conclude that there is asymmetric information in the consumer credit market, in the form of both adverse selection and moral hazard.

Most of the relevant literature on the evaluation of the impact of public subsidies to private firms deals with the estimation of causal effects of a binary treatment. However, several policies allow for different levels of subsidies, depending on the investment project, the firm dimension, the region and also on the firms’ choice. The aim of the paper is to evaluate the causal effect of a policy intervention in the case of a continuous treatment, exploring the impact of differences in treatment level on policy outcome. As an empirical application, we estimated the impact of subsidies allocated by L. 488/1992, the main regional policy in Italy, in the southern regions of the country in the period 1996-2000. We compare two estimation methods: a parametric method, based on a more traditional DID estimator adapted to the continuous treatment case, and a non parametric estimator, based on a novel two-step matching method developed in our recent work (Adorno, Bernini and Pellegrini, 2007a). On average, our results support the conclusions derived from methods based on the binary treatment: subsidies have a positive and often statistically significant effect on employment, fixed assets and turnover. However, the strong heterogeneity of the treatment outcome with respect to different levels of treatment is highlighted. We find that higher the level of incentive, higher the policy effect until a certain point, from which the marginal impact decreases. The results are robust to changes in the estimation method.

This paper provides new and updated empirical evidence about the stockholding behavior of Italian households. By exploiting Bank of Italy SHIW data, we find that in the period 2000-2004 stock market participation rates declined markedly, in contrast with what happened in other European countries and in the U.S. In order to understand this fact, we propose some explanations based on the estimation results of crosssectional and panel data probit regressions. We stress the importance of irrationality and myopic behavior and their relationships with the level of investors’ education.

This paper focuses on the difficulty of standard life-cycle models to predict the behavior observed in the reality, most noticeably the excess sensitivity of consumption to income, the under-provision for old-age consumption, the limited participation in the financial market, and the lack of asset decumulation after retirement. It shows that allowing for preference reversals, as it is the case in the “quasi-hyperbolic discounting” and “temptation” models, may contribute to explain jointly these economic puzzles. A life-cycle model based on temptation preferences, in particular, is attractive as it preserves time consistency and can be solved with standard dynamic programming techniques.