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Wage Bargaining and the Phillips Curve in Italy

Author

Listed:
  • Alessandra Del Boca

    (University of Brescia)

  • Michele Fratianni

    (Indiana University, Kelly School of Business, Bloomington US, Univ. Plitecnica Marche and MoFiR)

  • Franco Spinelli

    (University of Brescia)

  • Carmine Trecroci

    (University of Brescia)

Abstract

The theme of this paper is whether there was a textbook-like Phillips Curve in post-WWII Italy. We estimate a standard model of the relationship between inflation and the level of real economic activity over the 1949-1998 period and find no evidence of a significant and positive feedback from output to prices. We also estimate similar models for the UK and the US and compare them with the Italian experience. Italy stands out as sharply different from the two Anglo-Saxon countries. We attribute this difference, among other factors, to the role of wage coordination and indexation mechanisms. In particular, the scala mobile, the rigid indexation mechanism aimed at protecting wages from inflation contributed to the persistent inflation bias that Italy experienced almost until its entry into the EMU.

Suggested Citation

  • Alessandra Del Boca & Michele Fratianni & Franco Spinelli & Carmine Trecroci, 2010. "Wage Bargaining and the Phillips Curve in Italy," Mo.Fi.R. Working Papers 41, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.
    • Handle: RePEc:anc:wmofir:41
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    References listed on IDEAS

    as
    1. James H. Stock & Mark W. Watson, 2007. "Why Has U.S. Inflation Become Harder to Forecast?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(s1), pages 3-33, February.
    2. Chang-jin Kim & N. Kundan Kishor & Charles R Nelson, 2006. "A Time-Varying Parameter Model for a Forward-Looking Monetary Policy Rule Based on Real-Time Data," Working Papers UWEC-2007-32, University of Washington, Department of Economics.
    3. Marco Manacorda, 2004. "Can the Scala Mobile Explain the Fall and Rise of Earnings Inequality in Italy? A Semiparametric Analysis, 19771993," Journal of Labor Economics, University of Chicago Press, vol. 22(3), pages 585-614, July.
    4. Thomas Doan & Robert B. Litterman & Christopher A. Sims, 1983. "Forecasting and Conditional Projection Using Realistic Prior Distributions," NBER Working Papers 1202, National Bureau of Economic Research, Inc.
    5. James H. Stock & Mark W. Watson, 2007. "Why Has U.S. Inflation Become Harder to Forecast?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(s1), pages 3-33, February.
    6. Kim, Chang-Jin & Nelson, Charles R., 2006. "Estimation of a forward-looking monetary policy rule: A time-varying parameter model using ex post data," Journal of Monetary Economics, Elsevier, vol. 53(8), pages 1949-1966, November.
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    Cited by:

    1. Deev Oleg & Hodula Martin, 2016. "The Long-Run Superneutrality of Money Revised: the Extended European Evidence," Review of Economic Perspectives, Sciendo, vol. 16(3), pages 187-203, September.

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    Keywords

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    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • J50 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - General
    • N10 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - General, International, or Comparative

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