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We provide new evidence on the impact of peer effects on the schooling decisions of teenagers. In November 1980 a major earthquake hit Southern Italy. In the aftermath, young men from certain towns were exempted from compulsory military service. We show that the exemption raised high school graduation rates of boys by more than 2 percentage points by comparing high school graduation rates of young exempt men and older not exempt men from the least damaged areas and men of the same age groups from nearby towns that were not hit by the quake. Similar comparisons show that graduation rates of young women in the affected areas rose by about 2 percentage points. Since in Italy women are not subject to drafting, we interpret these findings as evidence of social effects of the decision of teenage boys of staying longer in school on that of teenage girls. Our estimates suggest that an increase of 1 percentage point of male graduation rates raises female probability of completing high school by about 0.7-0.8 percentage points. A series of robustness checks, including comparisons across different age groups and with different definitions of the comparison areas, suggest that the rise was due to the earthquake-related exemption, rather than other factors.

The labour market status of many non-working persons is at the boundary between unemployment and inactivity. Like the unemployed, they seek and are available for work; unlike them, their last search action was not recent enough to meet the ILO definition of unemployment. In this paper we examine by non-parametric tests how the transition probabilities of these out-of-the-labour-force job seekers differ from those of the unemployed as well as the other non-participants. First, using data from the European Community Household Panel, we show that in most EU countries these job seekers constitute a distinct labour market state. Second, we rely on information only available in the Italian Labour Force Survey to derive a measure of search intensity which we use to break down the out-of-the-labour-force job seekers. On the basis of their transition probabilities, the most active are indistinguishable from the unemployed.

In this paper, we propose a multisectoral model with which to investigate bottlenecks in the branches of Italian industry and their macroeconomic impact. We make use of linear programming techniques, input–output data, and highly disaggregated measures of capacity utilization. Focusing on intersectoral transactions as shock transmission mechanism, our model is meant to offer insights on the overall relevance and effect of sector-specific supply bottlenecks, which cannot be provided by aggregate models. According to our results, in the period 1980–1995, several industrial sectors, which produce mainly intermediate goods — such as electric power, ferrous, and nonferrous ores and metals, nonmetallic mineral products, paper and printing, and rubber and plastic — experienced binding supply constraints. We simulate the model and provide estimates of the impact on aggregate output and import growth, which turns out to have been quite significant.

This paper investigates the inflationary impact of demand pressure through markups. A multisectoral model of Italian industry is used to construct an aggregate indicator of the output gap which is sensitive to the occurrence of sectoral capacity bottlenecks. The econometric results suggest that the key variable in explaining industrial producer price dynamics is not the average value of the output gap in industry as a whole, but rather its level in critical sectors, i.e. those where capacity utilization is pushed close to the limit by intersectoral transactions. Furthermore, the evidence found indicates that the inflationary effect of high levels of domestic demand is significantly reinforced if foreign prices increase in relative terms, for example because of a devalution.

Articolo originariamente pubblicato in Moneta e Credito, vol. 50 n. 199, settembre 1997, pp. 337-367.

The problems of Italy�s education system mostly stem from its modus operandi and interactions with the expectations of families and students. The recent signs of improvement in Italian students� proficiency, plausibly reflecting greater emphasis on rigour, could be reinforced by making schools more autonomous and accountable, including in matters of staff management, and with a nationwide programme of support for the schools in greatest difficulty. The cost savings obtained over the years should mostly be reinvested into the system, enhancing teachers� professionalism. In higher education, the increasing supply of degree courses has not affected the typical problems of Italy�s public universities, which: still attract few researchers and students from abroad; are too undifferentiated and unspecialized; have a predominantly local teacher and student base. The renewal begun with the recent university reform, which has challenged the historically self-referential governance of the system, must stimulate more internal competition within the Italian university system with well-defined and stable rules to foster quality and reward merit, and it must also allow individual universities more autonomy so that a more differentiated supply structure can emerge.

Education systems in developed countries have faced many important changes over the past two decades changing only partially their structure and the way they operate. New educational needs became noticeable because of the variation in the population's composition in almost all countries, due to both natural balance and especially to migration balance.At the same time, the need to consolidate the basic education of the entire youthpopulation, as well as the need to consider new and broader educational needs of adults and elderly is widely recognized.Serious reconsideration is needed for more effective vocational education. A rather important challenge concerns the training of professional technicians and their employability by industry, in consideration of the need to support companies in innovation. How to combine maximum fairness and equal opportunities and the efficient use of resources is the common issue of many reform measures, especially in pre-primary, primary and general secondary education system. The focus on Us and Italy shades light on the main issues facing education policy in the two countries.

This paper examines the relationship between education and mortality in a young population of Italian males. In 1981 several cohorts of young men from specific southern towns were unexpectedly exempted from compulsory military service after a major quake hit the region. Comparisons of exempt cohorts from the least damaged towns on the border of the quake region with similar ones from neighbouring non-exempt towns just outside the region show that, by 1991, the cohorts exempted while still in high school display significantly higher graduation rates. The probability of dying over the decade 1991-2001 was also significantly lower. Several robustness checks confirm that the findings do not reflect omitted quake-related confounding factors, such as the ensuing compensatory interventions. Moreover, cohorts exempted soon after high school age do not display higher schooling or lower mortality rates, thus excluding that the main findings reflect direct effects of military service on subsequent mortality rather than a causal effect of schooling. The authors conclude that increasing the proportion of high school graduates by 1 percentage point leads to 0.1-0.2 percentage points lower mortality rates between the ages of 25 and 35.

This paper examines the relationship between education and mortality in a young population of Italian males. In 1981 several cohorts of young men from specific southern towns were unexpectedly exempted from compulsory military service after a major quake hit the region. Comparisons of exempt cohorts from the least damaged towns on the border of the quake region with similar ones from neighbouring non-exempt towns just outside the region show that, by 1991, the cohorts exempted while still in high school display significantly higher graduation rates. The probability of dying over the decade 1991-2001 was also significantly lower. Several robustness checks confirm that the findings do not reflect omitted quake-related confounding factors, such as the ensuing compensatory interventions. Moreover, cohorts exempted soon after high school age do not display higher schooling or lower mortality rates, thus excluding that the main findings reflect direct effects of military service on subsequent mortality rather than a causal effect of schooling. The authors conclude that increasing the proportion of high school graduates by 1 percentage point leads to 0.1-0.2 percentage points lower mortality rates between the ages of 25 and 35.

We estimate the private (individual) and social return to schooling in Italy and its macro regions. Our estimates take into account the effects of schooling on employment and wages, as well as the key features of the Italian tax and social security system. We find that the individual return to schooling compares favourably with the return to financial assets (especially in the South). At the social level, the available infrastructure-capital data indicates that the return to schooling exceeds that to infrastructures in the South. Recent evidence on peer effects and the consequences of increased education for health and crime suggest the overall social effects of schooling could be even greater

The aim of this report, which has been prepared by a Task Force of the Monetary Policy Committee of the Eurosystem, is to describe and analyse the main developments in labour supply and its determinants in the euro area, review the links between labour supply and labour market institutions, assess how well labour supply reflects the demand for labour in the euro area and identify the future challenges for policy-makers. The data available for this report generally cover the period from 1983 to spring 2007. JEL Classification: E5, J1, J2, J6.

ficulties we look at the composition of teachers’ pool and to their behaviour in the market 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 motivated this implicit contract. In particular we examine the mechanism that allocates teachers 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 resemble 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.

We combine individual and aggregate-level level data on educational attainment to study the determinants of university drop-out in Italy, one of the worst performers among developed countries. Based on detailed information on a representative sample of secondary school graduates and on local university supply we first show that family and educational background are relevant determinants of continuation probability. In particular, our results show that accounting for enrollment-induced sample selection significantly enhances the estimated coefficients with respect to standard probit analysis. We then combine our estimates with data on family and educational backgrounds of secondary school graduates in comparable European countries and find that differences in endowments only explain a minor fraction of the observed cross-country gap in students� attainments.

Since the mid-1980s fixed-term contracts have been used in many European countries to reduce firing costs. As this strategy may have led to segmented labour markets, recent policy interventions have enhanced permanent jobs by cutting their labour costs. Efficient design of these policies requires knowledge of the costs associated with employment protection legislation. In this paper we evaluate these costs by measuring firms� willingness to trade fixed-term for open-ended contracts in exchange for a cut in the labour cost of permanent jobs. Our results are based on a panel of Italian firms in the engineering sector whose labour costs were reduced by a tax credit granted to firms hiring workers on open-ended rather than fixed-term contracts. The trade-off is identified by comparing how the composition of recruitment by type of contract changed for firms that received the tax credit and those that did not. Potential distortions due to self-selection into the programme, firm-specific timevarying shocks or mechanical correlation induced by the selection rule into the programme, are accounted for by estimating the spurious effect of the tax credit in the years when it was not in force. Estimation is carried out in both a parametric and non-parametric setting that uses p-score to control for different probabilities of receiving the tax credit. We found that firms value the possibility of hiring one per cent new workers on a fixed-term contract as much as a cut in the labour cost of an open-ended worker in the range of 1.3-2.8 per cent. This result helps to explain recent employment growth in Italy, where the share of fixed-term contracts among new hires grew from 34 to 42 per cent between 1995 and 2003. Using our most conservative results, we evaluate that the labour cost reduction associated with this expansion amounted to anything between 10.4 and 22.4 per cent. Given the elasticity of employment to wages, the advent of flexibility in the Italian labour market can account for a large share, between 37 and 80 per cent, of employment growth in the private sector.

We estimate the private (individual) and social return to schooling in Italy and four macro regions. Our estimates take into account the effects of schooling on employment and wages as well as the key features of the Italian tax and social insurance system. We find that the individual return to schooling compares favorably to the return to financial assets (especially in the South). At the social level, the available infrastructure-capital data indicates that the return to schooling exceeds that to infrastructures in the South.

We estimate the private (individual) and social return to schooling in Italy and four macro regions. Our estimates take into account the effects of schooling on employment and wages as well as the key features of the Italian tax and social insurance system. We find that the individual return to schooling compares favorably to the return to financial assets (especially in the South). At the social level, the available infrastructure-capital data indicates that the return to schooling exceeds that to infrastructures in the South.

Paper prepared for the ECB-CEPR workship "What explains the pattern of labour supply in Europe", Frankfurt, 23-24 June 2003

Paper prepared for the ECB-CEPR workship "What explains the pattern of labour supply in Europe", Frankfurt, 23-24 June 2003 A long-standing economic tradition maintains that labour supply reacts to market tightness; its sensitivity to job quality has received less attention. If firms hire workers with both temporary and open-ended contracts, does participation increase when more permanent jobs are available? We investigate this relationship within a policy evaluation framework; in particular, we examine how labour supply reacted in Italy to a recent subsidy in favour of open-ended contracts. This subsidy increased labour force participation by 1.4% in 2001 and 2.1% in 2002. This increase was concentrated on males aged 35-54, with a low or at most a secondary schooling level. Conference details http://www.ecb.int/events/conferences/html/labour_supply.en.html

In this paper we investigate the urban/rural dimension of poverty in developed countries. We provide original estimates for Italy, we gather published statistics for France and the United States, and we produce novel cross-country estimates from the LIS database. We show that the size of urban poverty depends on where the boundaries of metropolitan districts are drawn and we observe that overlooking geographical differences in the cost of living is a particularly relevant hypothesis. We find that in France and the United States post-war economic growth and urbanisation were accompanied by a substantial reduction of the poverty risk for the rural population, while poverty rates improved less, or even sometimes deteriorated, for the urban population. The lack of a standard definition of urban/rural area precludes a rigorous comparative study. Our results indicate, however, that only in few countries (Denmark, the United Kingdom and the United States) the greatest poverty rates are found in central cities, while in all other developed countries poor persons are still relatively more frequent in rural areas. This pattern is stronger in the four non-developed economies examined here.

We investigate how the evidence for Italy from simple growth accounting exercises is modified by more accurate measurements of inputs. We describe the dynamics of total factor productivity in the last 20 years in Italy, and review theoretical and measurement issues that complicate the picture emerging from this simple exercise. We adjust the labour input for its composition and verify its impact on estimated multifactor productivity in the whole economy. We replicate the labour-quality adjustment for the industrial sector together with corrections for hours worked and capital utilisation. We find that a sizeable part of the observed growth of total factor productivity vanishes when these adjustments are applied. They are not sufficient, however, to overturn the evidence of a productivity slowdown in the Italian economy in the second half of the 1990s.

In a recent document OECD has suggested that the monetary union could bring about a convergence of wages level in Europe. Such a convergence could be rather harmful for some country's competitiveness and for the conduct of monetary policy, unless it is fully matched by a consistent equalisation in the levels of labour productivity. This paper contributes to this debate by proving an evaluation of the actual magnitude of the dispersion of manufacturing wages across of Europe. Results suggest that from the early seventies labour costs in European manufacturing sectors have been converging; thus in the 1990 actual dispersion of labour costs is rather low.The equalisation of wages is entirely due to the reduction of the between countries component of wage dispersion that has been driven by the levelling off of the labour productivity among European countries. The sectoral component of dispersion did not decline because inter industry wage differentials are stable over time and similar across countries, as they reflect aggregations of workers with different level of skill. However EMU could play a role in reducing wages dispersion across Europe by fostering a change in the national wage bargaining system, leading to more egalitarian paradigma, and by reducing firms’ rents on product markets by increasing competition.

The aim of this report, which has been prepared by a Task Force of the Monetary Policy Committee of the Eurosystem, is to describe and analyse the main developments in labour supply and its determinants in the euro area, review the links between labour supply and labour market institutions, assess how well labour supply reflects the demand for labour in the euro area and identify the future challenges for policy-makers. The data available for this report generally cover the period from 1983 to spring 2007.