The paper analyses the labour market impact of international trade on the Italian manufacturing sector. Using data for a panel of manufacturing industries the effects of trade-induced changes in sales on employment and wages are investigated. The evidence suggests that the industry adjustment to demand shocks took place mainly through employment changes. However, increased exposure to foreign competition had a small effect on the Italian labour market, while technological change seems to have a major role in explaining the increase in unemployment.

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Recently, several studies have emphasized the role of R&D expenditure in determining Total Factor Productivity (TFP). In this paper it is shown that the relationship between R&D variables and TFP is far from being established. In particular, by using data for the Italian economy, it is found that the estimated effects of R&D variables on TFP crucially depends on: (i) the way in which the production function, used to derive Solow residuals, is defined; (ii) the numbers of maintained hypotheses used to estimate Solow residuals; (iii) the level of aggregation of the data employed in the empirical analysis.

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