Abstract
This paper estimates the possible job-shortfall across Italian and EU regions using a time–space dynamic panel data model with a spatial moving average random effects structure of the disturbances. The paper is a companion paper to an earlier prediction exercise regarding Brexit. The model includes spatial and temporal dependencies involving the endogenous variable, leading to estimates based on a new dynamic spatial generalized moments estimator proposed by Baltagi et al. (Reg Sci Urban Econ, 2018. https://doi.org/10.1016/j.regsciurbeco.2018.04.013). The predictions use modified interregional trade estimates, assuming a reduction in trade flows between Italian and EU regions due to Italexit, to simulate the impact on employment across Italian regions and the wider EU. Comparisons are made between Italexit and Brexit.
Highlights
Italexit is a term used to describe the possible exit of Italy, the EU’s third largest economy, from the EU
Estimation of a model with employment related to output and capital is based on a viable data series over the period 2001 to 2010.2 Different assumptions are made about post2011 paths for gross value added (GVA) and gross fixed capital formation (GFCF), given that accessible data with the same geography are not available, these different assumptions have relatively little effect on outcomes
These considerations lead to the time–space dynamic panel data model given in Eqs. (7)–(10), ln t =
Summary
Italexit is a term used to describe the possible exit of Italy, the EU’s third largest economy, from the EU. I consider a so-called job-shortfall, that is the gross number of jobs likely to be lost due to trade reduction alone This is not a prediction of the actual, or net, change in employment, because the other factors such as increased trade due to the stimulus of a possible devaluation could more than offset the job-shortfall, or there could be a catastrophic job loss due to ensuing global economic chaos. Different assumptions regarding model structure, relevant data and estimation techniques can all potentially affect the predictions’ In both cases we see that the impact of exit on the job-shortfall is bilateral, regions within the UK and Italy and the rest of the EU are expected to see a job-shortfall. Estimation of a model with employment related to output and capital is based on a viable data series over the period 2001 to 2010.2 Different assumptions are made about post2011 paths for GVA and GFCF, given that accessible data with the same geography are not available, these different assumptions have relatively little effect on outcomes
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