The sources of unemployment fluctuations: an empirical application to the Italian case

The paper analyses the rise in Italian unemployment in a small structural V AR (sVAR) based on a Layard-Nickell framework. Unemployment is driven by fu lly permanent and long-lived but temporary shocks. The unemployment compone nt due to demand shocks appears sizeable, with swings amounting to 4 percen tage points, and quite persistent, showing an almost continuous increase si nce the beginning of the 1980s, Nonetheless, the bulk of unemployment rises is attributed to non-demand factors: temporary (productivity and labour su pply) and permanent (labelled as shocks to wage bargaining). The latter exp lain a 2.5-point rise during the 1970s, but showing no further increases si nce then. (C) 2001 Elsevier Science B.V. All rights reserved.