The standard Real Business Cycle literature mainly focuses on Walrasian models designed to fit the US institutional framework. Differences between the US and Europe, mostly evident in the labor market, suggest that a purely Walrasian model may be inappropriate to study European business cycles....

This paper suggests that the main (and possibly unique) source of beta- and omega- convergence in GDP per worker (i.e. labor productivity) across Italian regions over the 1980-2000 period is the change in technical and allocative efficiency, i.e. convergence in relative TFP levels. To reach this...