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Estimates of Structural Changes in the Wage Equation:Some Evidence for Italy

Author

Listed:
  • Mauro Costantini

    (ISAE - Institute for Studies and Economic Analyses)

  • Sergio de Nardis

    (ISAE - Institute for Studies and Economic Analyses)

Abstract

This paper focuses on the influence of labour market reforms on the wage equation for Italy over the period 1981-2006. Using Gregory and Hansen (1996) residuals based tests for cointegration in model with regime shifts, we try to detect endogenously a possible structural break in the long run relationship between real wage, unemployment rate and labour productivity. Evidence of a structural shift is found and parameter elasticities of the equation before and after the break are estimated.

Suggested Citation

  • 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).
  • Handle: RePEc:isa:wpaper:86
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    References listed on IDEAS

    as
    1. Ghysels, Eric & Perron, Pierre, 1996. "The effect of linear filters on dynamic time series with structural change," Journal of Econometrics, Elsevier, vol. 70(1), pages 69-97, January.
    2. Layard, Richard & Nickell, Stephen & Jackman, Richard, 2005. "Unemployment: Macroeconomic Performance and the Labour Market," OUP Catalogue, Oxford University Press, number 9780199279173.
    3. Elliott, Graham, 1999. "Efficient Tests for a Unit Root When the Initial Observation Is Drawn from Its Unconditional Distribution," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(3), pages 767-783, August.
    4. Zivot, Eric & Andrews, Donald W K, 2002. "Further Evidence on the Great Crash, the Oil-Price Shock, and the Unit-Root Hypothesis," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(1), pages 25-44, January.
    5. Bardsen, Gunnar & Eitrheim, Oyvind & Jansen, Eilev S. & Nymoen, Ragnar, 2005. "The Econometrics of Macroeconomic Modelling," OUP Catalogue, Oxford University Press, number 9780199246502.
    6. 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.
    7. Perron, Pierre & Rodriguez, Gabriel, 2003. "GLS detrending, efficient unit root tests and structural change," Journal of Econometrics, Elsevier, vol. 115(1), pages 1-27, July.
    8. Hansen, Bruce E, 2002. "Tests for Parameter Instability in Regressions with I(1) Processes," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(1), pages 45-59, January.
    9. Banerjee, Anindya & Lumsdaine, Robin L & Stock, James H, 1992. "Recursive and Sequential Tests of the Unit-Root and Trend-Break Hypotheses: Theory and International Evidence," Journal of Business & Economic Statistics, American Statistical Association, vol. 10(3), pages 271-287, July.
    10. Elliott, Graham & Rothenberg, Thomas J & Stock, James H, 1996. "Efficient Tests for an Autoregressive Unit Root," Econometrica, Econometric Society, vol. 64(4), pages 813-836, July.
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    Citations

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    Cited by:

    1. Francesco Pastore, 2010. "Assessing the impact of incomes policy: the Italian experience," International Journal of Manpower, Emerald Group Publishing, vol. 31(7), pages 793-817, October.
    2. 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.

    More about this item

    Keywords

    wage equation; cointegration; structural break.;

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity

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