Regional Wage and Productivity in Italy: A Spatio-temporal Analysis.

This paper analyzes the empirical functioning of the regional labor market in Italy (21 Italian regions over 21 years (1995 to 2015)). Starting from centralized union bargaining, we derive a micro-founded theoretical long-run relationship between the nominal wage per worker and average labor productivity. The long-run equation is then empirically verified using cointegration analysis, controlling for time and space dependence. We find that labor productivity has a positive impact on determining the nominal wage per worker. The magnitude of the impact is, on average, 0.28 when considering both direct and indirect (spillover) effects. According to the results, regional policies aimed at reducing local disparities must foster labor productivity, particularly in the South.