Tax relief, tax wedge and regional employment: evidence from Italy

In this paper I overview the legislative framework, referred to the Italian policies of tax relief on labour income and Fiscalizzazione, then I investigate the impact of the tax wedge on regional employment in Italy. The results show a negative effect, especially in the northern regions, due to the presence of a developed decentralized bargaining level that may lead to mechanisms of real wage resistance with negative consequences on employment, not only in the short term. The evidence suggests a differentiated effect not only among regions but also among sectors that might suggests to focus these policies on regions and sectors where the effect of the tax wedge on employment is greater, other than to promote the development of a second-level bargaining even in the South that could take into account local labour productivity changes.