Abstract

The aim of this paper is to study the functioning of local labour markets considering different geographical areas (macro-areas, regions, provinces). Looking at the growing differences in the unemployment rates between the North and the South of Italy, we investigate the existence of a negative relation linking wage levels to local unemployment rates. It would seem that the traditional result, better known as "wage curve", is not supported by the Italian experience. Using an appropriate geographical disaggregation and a dynamic specification that takes into account the existence of inertia in the adjustment processes, the relation that links wage levels to local unemployment often exhibits a positive sign, and in general it is not significant. Similar results are obtained even when the analysis is restricted to particular sub-groups of the labour market or to specific regions.