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Assessing the Impact of Incomes Policy: The Italian Experience

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  • Pastore, Francesco

    (Università della Campania Luigi Vanvitelli)

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.

Suggested Citation

  • Pastore, Francesco, 2010. "Assessing the Impact of Incomes Policy: The Italian Experience," IZA Discussion Papers 5082, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp5082
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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 13:01:00
    2. Leggende metropolitane bipartisan: i nostri risparmi verranno spazzati via!
      by Alberto Bagnai in Goofynomics on 2015-02-17 17:27:00

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    Cited by:

    1. Pastore, Francesco, 2017. "Why So Slow? The School-to-Work Transition in Italy," IZA Discussion Papers 10767, Institute of Labor Economics (IZA).
    2. F. Pastore, 2015. "The Mezzogiorno and Crisis after Market and State Failures. A Review of Economic Literature," Rivista economica del Mezzogiorno, Società editrice il Mulino, issue 3-4, pages 525-582.
    3. Francesco Pastore, 2015. "The European Youth Guarantee: labor market context, conditions and opportunities in Italy," IZA Journal of European Labor Studies, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 4(1), pages 1-22, December.
    4. 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.
    5. Alberto Bagnai & Christian Alexander Mongeau Ospina, 2014. "The a/simmetrie annual macroeconometric model of the Italian economy: structure and properties," a/ Working Papers Series 1405, Italian Association for the Study of Economic Asymmetries, Rome (Italy).
    6. Leonello Tronti, 2010. "The Italian productivity slow‐down: the role of the bargaining model," International Journal of Manpower, Emerald Group Publishing Limited, vol. 31(7), pages 770-792, October.
    7. Alberto Bagnai, 2016. "Italy’s decline and the balance-of-payments constraint: a multicountry analysis," International Review of Applied Economics, Taylor & Francis Journals, vol. 30(1), pages 1-26, January.
    8. Chiara Mussida & Dario Sciulli, 2016. "The trend over time of labour market opportunities for young people in Italy," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 33(2), pages 291-321, August.

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    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
    • E64 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Incomes Policy; Price Policy
    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes

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