IDEAS home Printed from https://ideas.repec.org/p/prt/dpaper/2_2012.html
   My bibliography  Save this paper

Equilibrium earning premium and pension schemes: The long-run macroeconomic effects of the union

Author

Listed:
  • Bruno Chiarini
  • Paolo Piselli

Abstract

Using the theoretical framework based on the monopoly union model described in Kidd and Oswald (1987) and Jones (1987), this paper provides an explicit framework to assess the role of wage moderation in Italy in the last twenty years. There are two crucial ingredients to the model: the composition of union membership and the pension system. We show that the increase in pensioners' membership in the presence of a pay-as-you-go (PAYG) pension scheme has led unions to moderate wage claims. However, this result is reversed when we shift from a PAYG system to a fully-funded (FF) regime (recently adopted in Italy): in this case, the model predicts a rise in wages with respect to the standard model, regardless of the share of pensioners in the membership.

Suggested Citation

  • Bruno Chiarini & Paolo Piselli, 2012. "Equilibrium earning premium and pension schemes: The long-run macroeconomic effects of the union," Discussion Papers 2_2012, D.E.S. (Department of Economic Studies), University of Naples "Parthenope", Italy.
    • Handle: RePEc:prt:dpaper:2_2012
    as

    Download full text from publisher

    File URL: http://economia.uniparthenope.it/ise/sito/DP/DES-DP_2012_02.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Andrea Brandolini & Piero Casadio & Piero Cipollone & Marco Magnani & Alfonso Rosolia, 2007. "Employment Growth in Italy in the 1990s: Institutional Arrangements and Market Forces," AIEL Series in Labour Economics, in: Nicola Acocella & Riccardo Leoni (ed.), Social Pacts, Employment and Growth. A Reappraisal of Ezio Tarantelli’s Thought, edition 1, chapter 4, pages 31-68, AIEL - Associazione Italiana Economisti del Lavoro.
    2. Jelle Visser, 2007. "Wage Bargaining Institutions in Europe. A Happy Marriage or Preparing for Divorce?," AIEL Series in Labour Economics, in: Nicola Acocella & Riccardo Leoni (ed.), Social Pacts, Employment and Growth, chapter 6, pages 123-156, Springer.
    3. Jones, Stephen R. G., 1987. "Union membership and employment dynamics," Economics Letters, Elsevier, vol. 25(2), pages 197-200.
    4. Bruno Chiarini & Paolo Piselli, 1997. "Wage Setting, Wage Curve and Phillips Curve: The Italian evidence," Scottish Journal of Political Economy, Scottish Economic Society, vol. 44(5), pages 544-565, November.
    5. Benhabib Jess & Perli Roberto, 1994. "Uniqueness and Indeterminacy: On the Dynamics of Endogenous Growth," Journal of Economic Theory, Elsevier, vol. 63(1), pages 113-142, June.
    6. Booth, Alison L, 1984. "A Public Choice Model of Trade Union Behaviour and Membership," Economic Journal, Royal Economic Society, vol. 94(376), pages 883-898, December.
    7. Peter C. B. Phillips & Bruce E. Hansen, 1990. "Statistical Inference in Instrumental Variables Regression with I(1) Processes," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 57(1), pages 99-125.
    8. Bronwyn Hall & Francesca Lotti & Jacques Mairesse, 2009. "Innovation and productivity in SMEs: empirical evidence for Italy," Small Business Economics, Springer, vol. 33(1), pages 13-33, June.
    9. Devicienti, Francesco & Maida, Agata & Pacelli, Lia, 2008. "The resurrection of the Italian wage curve," Economics Letters, Elsevier, vol. 98(3), pages 335-341, March.
    10. Francesco Pastore, 2010. "Assessing the impact of incomes policy: the Italian experience," International Journal of Manpower, Emerald Group Publishing Limited, vol. 31(7), pages 793-817, October.
    11. Bruno Chiarini, 1999. "The Composition of Union Membership: The Role of Pensioners in Italy," British Journal of Industrial Relations, London School of Economics, vol. 37(4), pages 577-600, December.
    12. Booth,Alison L., 1994. "The Economics of the Trade Union," Cambridge Books, Cambridge University Press, number 9780521468398, January.
    13. Daniele Checchi & Claudio Lucifora, 2002. "Unions and labour market institutions in Europe [‘Deunionisation, technical change and inequality’]," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 17(35), pages 361-408.
    14. Alison L. Booth, 1985. "The Free Rider Problem and a Social Custom Model of Trade Union Membership," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 100(1), pages 253-261.
    15. Sergio DESTEFANIS & Giuseppe MASTROMATTEO & Giovanni VERGA, 2005. "Wages and Monetary Policy in Italy Before and After the Wage Agreements," Rivista Internazionale di Scienze Sociali, Vita e Pensiero, Pubblicazioni dell'Universita' Cattolica del Sacro Cuore, vol. 113(2), pages 289-318.
    16. Piero, Casadio, 2003. "Wage formation in the Italian private sector after the 1992-93 income policy agreements," MPRA Paper 29396, University Library of Munich, Germany.
    17. Nicola Acocella & Riccardo Leoni (ed.), 2007. "Social Pacts, Employment and Growth," AIEL Series in Labour Economics, Springer, number 978-3-7908-1923-6, February.
    18. Chang, Juin-jen & Lai, Ching-chong & Chang, Wen-ya, 1998. "A Dynamic Model of Union Membership and Employment: A Comment," Economica, London School of Economics and Political Science, vol. 65(257), pages 145-151, February.
    19. Manos Matsaganis, 2007. "Union Structures and Pension Outcomes in Greece," British Journal of Industrial Relations, London School of Economics, vol. 45(3), pages 537-555, September.
    20. Francesco Daveri & Cecilia Jona-Lasinio, 2005. "Italy's Decline: Getting the Facts Right," Giornale degli Economisti, GDE (Giornale degli Economisti e Annali di Economia), Bocconi University, vol. 64(4), pages 365-410, December.
    21. Corneo, Giacomo, 1995. "Social custom, management opposition, and trade union membership," European Economic Review, Elsevier, vol. 39(2), pages 275-292, February.
    22. Corneo, Giacomo G., 1997. "The theory of the open shop trade union reconsidered," Labour Economics, Elsevier, vol. 4(1), pages 71-84, March.
    23. Mario Pianta & Andrea Vaona, 2007. "Innovation and Productivity in European Industries," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 16(7), pages 485-499.
    24. Bilancini, Ennio & D’Antoni, Massimo, 2012. "The desirability of pay-as-you-go pensions when relative consumption matters and returns are stochastic," Economics Letters, Elsevier, vol. 117(2), pages 418-422.
    25. Chiarini, Bruno & Piselli, Paolo, 1997. "Wage Setting, Wage Curve and Phillips Curve: The Italian Evidence," Scottish Journal of Political Economy, Scottish Economic Society, vol. 44(5), pages 545-565, November.
    26. Johansen, Soren, 1995. "Likelihood-Based Inference in Cointegrated Vector Autoregressive Models," OUP Catalogue, Oxford University Press, number 9780198774501, Decembrie.
    27. Bruno Chiarini, 1997. "A Dynamic Union Model with Pensioners Membership," Rivista italiana degli economisti, Società editrice il Mulino, issue 2, pages 147-162.
    28. Martin Feldstein & Horst Siebert, 2002. "Social Security Pension Reform in Europe," NBER Books, National Bureau of Economic Research, Inc, number feld02-2, March.
    29. Daniele Franco, 2002. "Italy: A Never-Ending Pension Reform," NBER Chapters, in: Social Security Pension Reform in Europe, pages 211-262, National Bureau of Economic Research, Inc.
    30. Kidd, David P & Oswald, Andrew J, 1987. "A Dynamic Model of Trade Union Behaviour," Economica, London School of Economics and Political Science, vol. 54(215), pages 355-365, August.
    31. McKenna, C. & Jones, S.R.G., 1992. "Dynamic Models of Union Membership," Working Papers 1992-04, University of Guelph, Department of Economics and Finance.
    32. Askildsen, Jan Erik & Nilsen, Oivind Anti, 2002. "Union membership and wage formation," European Journal of Political Economy, Elsevier, vol. 18(2), pages 345-363, June.
    33. Parisi, Maria Laura & Schiantarelli, Fabio & Sembenelli, Alessandro, 2006. "Productivity, innovation and R&D: Micro evidence for Italy," European Economic Review, Elsevier, vol. 50(8), pages 2037-2061, November.
    34. Richard Disney, 1990. "Explanations of the Decline in Trade Union Density In Britain: an Appraisal," British Journal of Industrial Relations, London School of Economics, vol. 28(2), pages 165-177, July.
    35. Mauro Costantini & Sergio de Nardis, 2007. "Estimates of Structural Changes in the Wage Equation:Some Evidence for Italy," ISAE Working Papers 86, ISTAT - Italian National Institute of Statistics - (Rome, ITALY).
    36. Buiter, Willem H, 1984. "Saddlepoint Problems in Continuous Time Rational Expectations Models: A General Method and Some Macroeconomic Examples," Econometrica, Econometric Society, vol. 52(3), pages 665-680, May.
    37. Boeri, Tito & Brugiavini, Agar & Calmfors, Lars (ed.), 2001. "The Role of Unions in the Twenty-first Century: A Report for the Fondazione Rodolfo Debenedetti," OUP Catalogue, Oxford University Press, number 9780199246588, Decembrie.
    38. Nicola‐Maria Riley, 1997. "Determinants of Union Membership: A Review," LABOUR, CEIS, vol. 11(2), pages 265-301, June.
    39. Jelle Visser, 2007. "Wage Bargaining Institutions in Europe. A Happy Marriage or Preparing for Divorce?," AIEL Series in Labour Economics, in: Nicola Acocella & Riccardo Leoni (ed.), Social Pacts, Employment and Growth. A Reappraisal of Ezio Tarantelli’s Thought, edition 1, chapter 7, pages 123-156, AIEL - Associazione Italiana Economisti del Lavoro.
    40. Jones, Stephen R G & McKenna, C J, 1994. "A Dynamic Model of Union Membership and Employment," Economica, London School of Economics and Political Science, vol. 61(242), pages 179-189, May.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Daniele Checchi, 2000. "Time series evidence on union densities in European countries," Departmental Working Papers 2000-10, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
    2. Schnabel, Claus, 2002. "Determinants of trade union membership," Discussion Papers 15, Friedrich-Alexander University Erlangen-Nuremberg, Chair of Labour and Regional Economics.
    3. Schnabel, Claus & Wagner, Joachim, 2003. "Determinants of Trade Union Membership in Western Germany: Evidence from Micro Data, 1980-2000," IZA Discussion Papers 708, Institute of Labor Economics (IZA).
    4. Schnabel, Claus & Wagner, Joachim, 2005. "Determinants of Union Membership in 18 EU Countries: Evidence from Micro Data, 2002/03," IZA Discussion Papers 1464, Institute of Labor Economics (IZA).
    5. Schirwitz, Beate & Dittrich, Marcus, 2006. "A Dynamic Model of Union Behaviour. The Role of an Endogenous Outside Option and Bargaining Centralisation," Dresden Discussion Paper Series in Economics 07/06, Technische Universität Dresden, Faculty of Business and Economics, Department of Economics.
    6. Bronwyn Hall & Francesca Lotti & Jacques Mairesse, 2009. "Innovation and productivity in SMEs: empirical evidence for Italy," Small Business Economics, Springer, vol. 33(1), pages 13-33, June.
    7. Schnabel, Claus & Wagner, Joachim, 2003. "Trade Union Membership in Eastern and Western Germany: Convergence or Divergence?," IZA Discussion Papers 707, Institute of Labor Economics (IZA).
    8. Laszlo Goerke & Markus Pannenberg, 2007. "Trade Union Membership and Works Councils in West Germany," Industrielle Beziehungen - Zeitschrift fuer Arbeit, Organisation und Management - The German Journal of Industrial Relations, Rainer Hampp Verlag, vol. 14(2), pages 154-175.
    9. Effrosyni Adamopoulou & Ernesto Villanueva, 2020. "Wage determination and the bite of collective contracts in Italy and Spain: evidence from the metal working industry," Working Papers 2036, Banco de España.
    10. Piero, Casadio, 2010. "Contrattazione aziendale integrativa e differenziali salariali territoriali: informazioni dall'indagine sulle imprese della Banca d'Italia," MPRA Paper 29384, University Library of Munich, Germany.
    11. Boeri, Tito, 2014. "Two-Tier Bargaining," IZA Discussion Papers 8358, Institute of Labor Economics (IZA).
    12. Francesco Pastore, 2010. "Assessing the impact of incomes policy: the Italian experience," International Journal of Manpower, Emerald Group Publishing Limited, vol. 31(7), pages 793-817, October.
    13. Lucifora, Claudio & Origo, Federica, 2012. "Performance Related Pay and Firm Productivity: New Evidence from a Quasi-Natural Experiment in Italy," IZA Discussion Papers 6483, Institute of Labor Economics (IZA).
    14. Daniele Checchi & Claudio Lucifora, 2002. "Unions and labour market institutions in Europe," Departmental Working Papers 2002-16, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
    15. Bruno Chiarini & Massimo Giannini, 2000. "A Model Of Union Behaviour And Benefits Under Uncertainty - Did Thatcher'S Benefits Policy Increase Employment And Reduce Union Power?," Working Papers 5_2000, D.E.S. (Department of Economic Studies), University of Naples "Parthenope", Italy.
    16. Lai, Ching-chong & Chang, Juin-jen & Chang, Wen-ya, 2001. "Currency devaluation in an open-shop union," International Review of Economics & Finance, Elsevier, vol. 10(1), pages 61-74.
    17. Vaona, Andrea, 2006. "The duration of union membership: An empirical study," Kiel Working Papers 1268, Kiel Institute for the World Economy (IfW Kiel).
    18. Piero Casadio, 2010. "Firm level wage bargaining and territorial wage differentials: evidence from the Bank of Italy survey on firms," Politica economica, Società editrice il Mulino, issue 2, pages 241-292.
    19. Matteo Bugamelli & Francesca Lotti & Monica Amici & Emanuela Ciapanna & Fabrizio Colonna & Francesco D�Amuri & Silvia Giacomelli & Andrea Linarello & Francesco Manaresi & Giuliana Palumbo & Filippo , 2018. "Productivity growth in Italy: a tale of a slow-motion change," Questioni di Economia e Finanza (Occasional Papers) 422, Bank of Italy, Economic Research and International Relations Area.
    20. Roberto Torrini, 2015. "Labour, Profit and Housing Rent Shares in Italian GDP: Long-Run Trends and Recent Patterns," Politica economica, Società editrice il Mulino, issue 3, pages 275-314.

    More about this item

    Keywords

    Union membership; Pensioners; Wage-pension trade-off;
    All these keywords.

    JEL classification:

    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts
    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:prt:dpaper:2_2012. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Antonietta Milano (email available below). General contact details of provider: https://edirc.repec.org/data/isnavit.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.