Assessing the Impact of Incomes Policy: The Italian Experience
37 Pages Posted: 2 Aug 2010
Abstract
The Saint Valentine's decree (1984) and the ensuing hard fought referendum (1985), which reduced the automatisms of scala mobile, started a process of redefinition of wage fixing in Italy, which culminated with the final abolition of scala mobile (1992) and the approval of Protocollo d'intesa (1993). Since then, following New Corporatist principles, a national system of centralised wage bargaining (concertazione) and the so-called "institutional indexation" have governed the determination of wages. This paper aims to assess the impact of such incomes policy agreements on the long and short run equilibrium relationship between real wages, labour productivity and unemployment. Different time series econometric tools confirm that incomes policy has altered the relationship between real wages and productivity, generating not only a permanent downward impact on prices, but also on real wages. In a sense, incomes policy has caused a new form of (upward) wage rigidity. Interestingly, no impact of incomes policy on the weak relationship between real wages and unemployment is detected. The analysis calls for a careful revision of the 1993 Protocol aimed at: a) better protecting the purchasing power of real wages without losing control on inflation; b) introducing growth generating mechanisms.
Keywords: New Keynesian macroeconomic theory, neo-corporatism, models of industrial relations, Phillips Curve, incomes policy, centralised wage bargaining, macroeconomic policy evaluation, income distribution, cointegration analysis, structural break testing, scala mobile, Protocollo d'intesa, Italy
JEL Classification: C22, E12, E25, E64, E65
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Recommended Papers
-
Unemployment, Growth and Taxation in Industrial Countries
By Francesco Daveri and Guido Tabellini
-
By Jan C. Van Ours and Michèle Belot
-
Policy Complementarities: The Case for Fundamental Labor Market Reform
By David T. Coe
-
Labor Market Institutions and Demographic Employment Patterns
By Giuseppe Bertola, Francine D. Blau, ...
-
Labour Market Institutions and Demographic Employment Patterns
By Giuseppe Bertola, Francine D. Blau, ...
-
By Giuseppe Bertola, Francine D. Blau, ...
-
By Giuseppe Bertola, Francine D. Blau, ...
-
Taxation and the Structure of Labor Markets: The Case of Corporatism
By Lawrence H. Summers, Jonathan Gruber, ...