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Cambridge Journal of Economics Advance Access originally published online on November 8, 2007
Cambridge Journal of Economics 2008 32(2):325-347; doi:10.1093/cje/bem032
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© The Author 2007. Published by Oxford University Press on behalf of the Cambridge Political Economy Society. All rights reserved.

Evaluating innovation and labour market relationships: the case of Italy

Luca Pieroni and Fabrizio Pompei*

* Department of Economics, Finance and Statistics, University of Perugia

Address for correspondence: Luca Pieroni, Departments of Economics, Finance and Statistics, Via Pascoli 19, 06123 Perugia, Italy; email: lpieroni{at}unipg.it

In this paper the link between labour market flexibility and innovation is analysed paying particular attention to the different technological regimes of economic activities and the different geographical areas of the Italian economy. A dynamic panel data specification is used to assess the endogenous relationship between patents, included as a proxy for innovation, and job turnover and wages, which represent labour market indicators. Our results show that higher job turnover only has a significant and negative impact on patent activities in regional sectors of Northern Italy, while blue and white collar wages have been generally found to have a positive and significant impact on innovation.

Key Words: Labour market flexibility • Innovation • Dynamic panel data • Endogeneity

JEL classifications: R12, J40, O31

Manuscript received January 30, 2006; final version received December 11, 2006.


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