Front Matter Page

© 2002 International Monetary Fund

October 2002

IMF Country Report No. 02/232

Italy: Selected Issues

The Selected Issues paper for Italy was prepared by a staff team of the International Monetary Fund as background documentation for the periodic consultation with the member country. It is based on the information available at the time it was completed on October 7, 2002. The views expressed in this document are those of the staff team and do not necessarily reflect the views of the government of Italy or the Executive Board of the IMF.

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Front Matter Page

INTERNATIONAL MONETARY FUND

ITALY

Selected Issues

Prepared by a staff team consisting of Michael Keen (FAD), Christopher Kent, and Athanasios Vamvakidis (EU1)

Approved by the European I Department

October 7, 2002

Contents

• I. Introduction and Overview

Contents

• II. New Estimates of Potential Output

  • A. Introduction

  • B. The Production Function Approach

  • C. Data Description, Trend TFP, and Potential Output

    • Data Description

    • Potential TFP

    • Production function results

  • D. Comparison with EU, OECD and the Italian Authorities Estimates

  • E. Conclusion

• Tables

• 1. Summary Statistics—Annual Averages

• 2. TFP Growth

• 3. Output Gap and Potential Growth Estimates

• 4. Output Gap and Potential Growth, Production Function Estimates

• Figures

• 1. Employment Growth and Labor Productivity, 1980–2001

• 2. TFP Growth—Measured and Filtered, 1981–2007

• 3. Adjusted TFP Growth, 1981–2007

• 4. Employment Elasticity with Respect to GDP, 1975–2007

• Appendices

• I. Data

• II. NAIRU Estimates

• References

Contents

• III. Regional Wage Differentiation and Wage Bargaining Systems: The Case of Italy

  • A. Introduction

  • B. The Case of Italy

    • The Italian labor market

    • The wage determination system in Italy

  • C. Wage Bargaining System and Regional Wage Differentiation

    • Literature review

    • Wage bargaining centralization and regional wage differentiation in the euro area: empirical results

  • D. Conclusions

• Tables

• 1. Labor Market Characteristics in Italy and Other Selected Economies, 1998

• 2. Unemployment and Participation Rates in Selected OECD Countries: 1980–2001

• 3. Regional Unemployment Rates, 1983–2000

• 4. EU, Unemployment Rate (Regional Coefficient of Variation)

• 5. Responsiveness of Regional Employment to Aggregated Shocks: Regressing Regional Employment Growth on Employment Growth in the Rest of Italy

• 6. Compensation Per Employee and Gross Internal Migration in Selected OECD Countries

• 7. Gross Nominal Wages in the South Over Total Labor Force, Italy = 100

• 8. Labor Productivity by Region, 1995–99

• 9. Collective Bargaining Characteristics of Selected OECD Countries

• 10. Italy: Regional Wage Differentiation and Coordination in Wage Bargaining: Euro Area, 1998

• Figures

• 1. Regional Unemployment Rates, 1983–2000

• 2. Regional Coefficient of Variation for Unemployment Rates, 1983–2000

• 3. Regional Wage Coefficient of Variation (20 regions), 1983–99

• 4. Wages in the South as a Percent of Wages in the North, 1983–99

• 5. Coefficient of Variation, Hourly Wages of Blue Collar Workers, 1975–85

• References

Contents

• IV. Tax Reform in Italy

  • A. Introduction

  • B. Taxation of Employment Income

    • The reforms

    • Assessment

• C. The Corporate Tax (IRPEG)

  • The reforms

  • Assessment

• D. Taxation of Interest and Capital Gains

  • The reforms

  • Assessment

• E. The IRAP

  • The reform

  • Assessment

• F. Toward a Nordic Dual Income Tax?

• G. Conclusion

• Tables

• 1. Revenue Effects of the Main Components of Reform

• 2. Current Rate Schedule of the IRPEF

• 3. Statutory and Effective Rates of Corporation Tax in the EU

• 4. Rates of Taxation Under Nordic Dual Income Tax Systems, 2000

• References