Wages and Prices in Italy During the Crisis: The Firms’ Perspective

55 Pages Posted: 25 Feb 2016

See all articles by Francesco D’Amuri

Francesco D’Amuri

Bank of Italy; University of Essex - Institute for Social and Economic Research (ISER)

Silvia Fabiani

Bank of Italy

Roberto Sabbatini

Bank of Italy

Raffaele Tartaglia-Polcini

Bank of Italy

Fabrizio Venditti

Bank of Italy

Eliana Viviano

Bank of Italy

Roberta Zizza

Bank of Italy

Date Written: September 24, 2015

Abstract

Following the two surveys carried out in 2007 and 2009 on firms’ price and wage setting practices, in June 2013 the ESCB’s Wage Dynamics Network (WDN) conducted a third survey aimed at assessing, through a harmonised questionnaire, the most important transformations under way in the national labour markets. This paper documents the results of the survey carried out in Italy. The sovereign debt crisis severely hit the Italian economy, causing a collapse in demand, increased uncertainty and difficulties in accessing external finance. Firms responded by decreasing labour input (adjusting both the intensive and the extensive margins) more often than wages. However, wage-setting practices were also affected by the new economic landscape: the percentage of workers employed in firms enacting wage freezes or cuts has steadily increased since 2010, reaching 17% of the total workforce in the sectors considered in 2013. Furthermore, a large share of companies have adapted their pricing strategy to the new economic environment; the frequency of price adjustments has increased, mainly as a reaction to stronger competition.

Keywords: labour cost adjustment, pricing strategies

JEL Classification: E31, J23, J30, J31

Suggested Citation

D’Amuri, Francesco and Fabiani, Silvia and Sabbatini, Roberto and Tartaglia-Polcini, Raffaele and Venditti, Fabrizio and Viviano, Eliana and Zizza, Roberta, Wages and Prices in Italy During the Crisis: The Firms’ Perspective (September 24, 2015). Bank of Italy Occasional Paper No. 289. Available at SSRN: https://ssrn.com/abstract=2737301 or http://dx.doi.org/10.2139/ssrn.2737301

Francesco D’Amuri (Contact Author)

Bank of Italy ( email )

Via Nazionale 91
00184 Roma
Italy

University of Essex - Institute for Social and Economic Research (ISER) ( email )

Wivenhoe Park
Colchester CO4 3SQ
United Kingdom

Silvia Fabiani

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Roberto Sabbatini

Bank of Italy ( email )

Via Nazionale 91
00184 Roma
Italy

Raffaele Tartaglia-Polcini

Bank of Italy ( email )

Via Nazionale 91
00184 Roma
Italy
+390647922899 (Phone)
+390647924764 (Fax)

Fabrizio Venditti

Bank of Italy ( email )

Via Nazionale 91
00184 Roma
Italy

Eliana Viviano

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Roberta Zizza

Bank of Italy ( email )

Via Nazionale 91
00184 Roma
Italy

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