Employment incentives and the disaggregated impact on the economy. The Italian case
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Employment incentives and the disaggregated impact on the economy. The Italian case Jacopo Zotti1 · Rosita Pretaroli2 · Francesca Severini1 · Claudio Socci3 · Giancarlo Infantino3 Received: 10 January 2020 / Accepted: 10 July 2020 © Springer Nature Switzerland AG 2020
Abstract Over the past two decades, the Italian labour market has undergone a number of profound changes. A thorough analysis of these changes shows that there has been a progressive employment polarisation, although with a very peculiar dynamics. While employment did grow in high-skill and low-skill occupations, and it shrank in the medium-skill ones, these changes did not take place simultaneously, as polarisation assumes. Moreover, wage polarisation is hardly observable in the same period. Quite differently, Italy has been characterised by relatively low or even declining returns to education along with progressively decreasing wages in the low-skill segment of the labour market. In this context, we study the potential of an employment incentive policy, for which we imagine two options, one targeting workers in high-skill and the other in low-skill occupations. The objectives of the policy are enhancing aggregate employment and improving working conditions (wages) either in high-skill or low-skill occupations, depending of the option. For the simulation of the two policy options, we employ an integrated model that combines a macro disaggregated and multi-sectoral Computable General Equilibrium (CGE) model with a micro-simulation model. While the CGE model evaluates how the macroeconomic shock reverberates on the labour demand at industry level, the micro-simulation model computes how the changes in macroeconomic variables affect households’ decisions in terms of labour supply and final consumption. Keywords Skills · Labour force and employment · Labour demand · Social accounting matrix · CGE models · Fiscal policy JEL codes C68 · E16 · I26 · J21 · J24
Additional results and copies of the computer programs used to generate the results presented in the paper are available from the lead author at [email protected]. * Francesca Severini [email protected] Extended author information available on the last page of the article
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Economia Politica
1 Introduction Since the early Nineties, the Italian labour market has undergone a series of profound changes. In the face of the complexity of the whole picture, Basso (2019) observes two main stylised facts. In terms of employment, the labour market experienced a major upgrading in the years before the mid-2000s (e.g. Goos et al. 2009; Olivieri 2012; Olivieri and Nellas 2012), with an expansion in high-skill employment and a contraction in low-skill occupations, and a subsequent downgrading in the following decade (Basso 2019; Bosio and Leonardi 2010; Franzini and Raitano 2009). In terms of wage levels, the periodization is similar but the evolution is different. Between the mid-Eighties and the mid-2000s, there is evidence of a substantial wage polarizat
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