In this contribution we show that the dualistic nature of the Italian economy has been, and still is, crucial for the design of short- and long-run macroeconomic policies, concerning unemployment, income growth and public finance. We establish the seriousness of the dualistic process of Italian regional development using several approaches. We then considered the regional nature of the Italian unemployment and show that it has profound implications for short- and long-run policies. In particular, we find that an aggregate price–unemployment relationship must be rejected. Different values of equilibrium unemployment rates for the main macro-regions of Italy are found and shortrun policy implications discussed. We then consider how this heterogeneity relates to the design of growth-promoting policies. Lastly, we present evidence in favor of the importance of the missing growth of the Italian southern regions for the evolution of the Italian public finance.
