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The worsening of wage expectations in Italy: a study based on administrative data

  • Elena Giarda

Purpose – This paper aims to build on existing studies on the relationship between individual wages, age and experience, and provide new evidence on the determinants of wages in Italy. Design/methodology/approach – Wage-age profiles, which include cohort variables to capture generational differences in wages and are characterised by a changing-over-time structure, are estimated by fixed and random effects panel regressions. The analysis exploits a longitudinal dataset of administrative data on wages for the period 1985-1999. Findings – This paper shows that wage to age profiles for different cohorts of workers are not stable over time: although younger generations of Italian workers are benefiting from higher starting wages than older generations, they face the prospect of lower growth of future earnings. It also confirms the existence of a significant supply effect: the bigger the cohort relative to the active population, the smaller the cohort's gain in terms of wage levels. Finally, it captures the dependence of individual wages on aggregate labour market conditions: individual wages are shown to be negatively related to the unemployment rate and positively related to the union wage index. Research limitations/implications – Although the paper does not propose a novel theoretical approach to individual wage analysis, it demonstrates the benefits of a more integrated empirical analysis of individual wages. Practical implications – The empirical findings suggest that it would be possible and useful to integrate the changing age profiles of individual wages with the estimation and projections of Italian aggregate industry and service sector average wages. Originality/value – The paper provides new evidence on the determinants of the dynamics of individual wages through the estimation of time-varying wage to age profiles of workers in the Italian industry and service sectors.

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Article provided by Emerald Group Publishing in its journal International Journal of Manpower.

Volume (Year): 29 (2008)
Issue (Month): 1 (May)
Pages: 64-87

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Handle: RePEc:eme:ijmpps:v:29:y:2008:i:1:p:64-87
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  1. Finis Welch, 1979. "Effects of Cohort Size on Earnings: The Baby Boom Babies' Financial Bust," UCLA Economics Working Papers 146, UCLA Department of Economics.
  2. Paul Beaudry & David Green, 1997. "Cohort Patterns in Canadian Earnings: Assessing the Role of Skill Premia in Inequality Trends," NBER Working Papers 6132, National Bureau of Economic Research, Inc.
  3. Brian Bell & Stephen Nickell & Glenda Quintini, 2000. "Wage equations, wage curves and all that," LSE Research Online Documents on Economics 20165, London School of Economics and Political Science, LSE Library.
  4. Moulton, Brent R., 1986. "Random group effects and the precision of regression estimates," Journal of Econometrics, Elsevier, vol. 32(3), pages 385-397, August.
  5. Brunello, Giorgio & Comi, Simona, 2000. "Education and Earnings Growth: Evidence from 11 European Countries," IZA Discussion Papers 140, Institute for the Study of Labor (IZA).
  6. John B. Burbidge & Lonnie Magee & A. Leslie Robb, 1997. "Cohort, Year and Age Effects in Canadian Wage Data," Independence and Economic Security of the Older Population Research Papers 19, McMaster University.
  7. Devicienti, Francesco & Maida, Agata & Pacelli, Lia, 2008. "The resurrection of the Italian wage curve," Economics Letters, Elsevier, vol. 98(3), pages 335-341, March.
  8. Baltagi, Badi H. & Blien, Uwe, 1998. "The German wage curve: evidence from the IAB employment sample," Economics Letters, Elsevier, vol. 61(2), pages 135-142, November.
  9. Agar Brugiavini & Franco Peracchi, 2003. "Social Security Wealth and Retirement Decisions in Italy," LABOUR, CEIS, vol. 17(SpecialIs), pages 79-114, 08.
  10. David Card, 1995. "The Wage Curve: A Review," Working Papers 722, Princeton University, Department of Economics, Industrial Relations Section..
  11. Fertig, Michael & Schmidt, Christoph M., 2003. "Gerontocracy in Motion? - European Cross-Country Evidence on the Labor Market Consequences of Population Ageing," RWI Discussion Papers 8, Rheinisch-Westfälisches Institut für Wirtschaftsforschung (RWI).
  12. Brunello, Giorgio & Lauer, Charlotte, 2005. "Are Wages in Southern Europe more Flexible? The Effects of a Cohort Size on European Earnings," ZEW Discussion Papers 05-45, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  13. Jacob Mincer, 1958. "Investment in Human Capital and Personal Income Distribution," Journal of Political Economy, University of Chicago Press, vol. 66, pages 281.
  14. David Card & Thomas Lemieux, 2000. "Can Falling Supply Explain the Rising Return to College for Younger Men? A Cohort-Based Analysis," NBER Working Papers 7655, National Bureau of Economic Research, Inc.
  15. Stapleton, David C & Young, Douglas J, 1988. "Educational Attainment and Cohort Size," Journal of Labor Economics, University of Chicago Press, vol. 6(3), pages 330-61, July.
  16. Brunello, Giorgio & Comi, Simona & Lucifora, Claudio, 2000. "The College Wage Gap in 10 European Countries: Evidence from Two Cohorts," IZA Discussion Papers 228, Institute for the Study of Labor (IZA).
  17. Sanders Korenman & David Neumark, 2000. "Cohort Crowding and Youth Labor Markets (A Cross-National Analysis)," NBER Chapters, in: Youth Employment and Joblessness in Advanced Countries, pages 57-106 National Bureau of Economic Research, Inc.
  18. Cappellari, Lorenzo, 2000. "The Covariance Structure of Italian Male Wages," Manchester School, University of Manchester, vol. 68(6), pages 659-84, December.
  19. Heckman, James J, 1979. "Sample Selection Bias as a Specification Error," Econometrica, Econometric Society, vol. 47(1), pages 153-61, January.
  20. repec:rwi:dpaper:0008 is not listed on IDEAS
  21. Psacharopoulos, George & Layard, Richard, 1979. "Human Capital and Earnings: British Evidence and a Critique," Review of Economic Studies, Wiley Blackwell, vol. 46(3), pages 485-503, July.
  22. Creedy, J & Hart, P E, 1979. "Age and the Distribution of Earnings," Economic Journal, Royal Economic Society, vol. 89(354), pages 280-93, June.
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