HYSTERESIS AND THE REGIONAL NAIRUs IN ITALY

This paper investigates the determinants of regional unemployment disparities in Italy. Relying on panel unit root tests and data over the 1977–2003 years, we reject the hysteresis hypothesis and then proceed to estimate the non‐accelerating inflation rate of unemployment (NAIRU) for each of the 20 Italian regions. Our estimates of the regional NAIRUs turn out to be fairly precise and allow us to draw two interesting conclusions. First, the hypothesis of constant regional NAIRUs between 1977 and 2003 is supported by the data. Second, we find that there is a significant degree of heterogeneity among the regional NAIRUs.