Modelling a Regional Economic System: The Case of Lombardy

Abstract

We set up a regional econometric model of Lombardy's labour market, in which both labour demand and supply are endogenously determined. The model simulations evaluate the response of the regional labour market, in comparison with the national one, to exogenous shocks depending on shocks in either demand or supply. The intersectoral difference highlights the fact that industry still maintains a crucial role in generating employment multiplier effects, which in turn may reduce unemployment. This evidence has important policy implications, as it suggests that industrial policy may play a crucial role in stimulating the whole regional growth process.