Labor Markets Between the Two World Wars: Estimates for Interwar Italy, 1921-1939

Abstract We exploit the interwar population censuses of 1921, 1931 and 1936 to develop a new dataset on Italy’s labor markets comprehensive of population aggregates, labor force, inactivity and unemployment figures. We then use the same sources to propose a break-down of all labor market stocks by sex in order to obtain a series for male and female unemployment rates in interwar Italy. We compare our estimates with the existing evi-dence, highlighting that our figures could be considered as an upper-bound unemploy-ment rate that includes unemployed and non-full-time workers. We find that changes in the unemployment rate were mostly driven by employment rates in the 1920s and by a contracting labor force in the 1930s. We then present our estimated labor market evi-dence paired with existing evidence on wage levels to propose the possible mechanisms behind high interwar unemployment rates. The paper shows that changes in inactivity levels during the 1930s were a result of wage rigidities, creating a feedback loop between inactivity and wage rates.