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Assessing the Impact of Incomes Policy: The Italian Experience

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  • Pastore, Francesco

    ()
    (University of Naples II)

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.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 5082.

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Length: 37 pages
Date of creation: Jul 2010
Date of revision:
Publication status: published in: International Journal of Manpower, 2010, 31 (7), 793-817
Handle: RePEc:iza:izadps:dp5082

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Keywords: Italy; scala mobile; Protocollo d'intesa; macroeconomic policy evaluation; income distribution; centralised wage bargaining; incomes policy; Phillips Curve; neo-corporatism; models of industrial relations; New Keynesian macroeconomic theory; cointegration analysis; structural break testing;

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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Lavoro mobile o scala mobile?
    by Alberto Bagnai in Goofynomics on 2012-04-27 08:01:00
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Cited by:
  1. Leonello Tronti, 2010. "The Italian productivity slow-down: the role of the bargaining model," International Journal of Manpower, Emerald Group Publishing, Emerald Group Publishing, vol. 31(7), pages 770-792, November.
  2. Bruno Chiarini & Paolo Piselli, 2012. "Equilibrium earning premium and pension schemes: The long-run macroeconomic effects of the union," Discussion Papers, D.E.S. (Department of Economic Studies), University of Naples "Parthenope", Italy 2_2012, D.E.S. (Department of Economic Studies), University of Naples "Parthenope", Italy.

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