WAGE BEHAVIOR AND THE INSTITUTIONAL STRUCTURE OF THE ITALIAN LABOR MARKET

The objective of Chapter 1 is to formulate a wage equation for Italy in the 1960-1983 period and examine its pattern of instability in connection with institutional modifications of the labor relation system and with changes in the structural characteristics of the labor market. Particular features of the approach are: (i) the relevant labor market variable in the wage equation is the estimated segmented trend of unemployment; (ii) the indexation mechanism is modeled explicitly so that institutionally determined parameters can be identified and the built-in instability they create distinguished from behavioral instability. Results show that the model including the estimated piecewise trend of unemployment outperforms the traditional Phillips curve with actual unemployment rate and that, once the trend is estimated to be segmented, the cyclical component does not have any effect on wages.; In Chapter II, the methodology used in Chapter I is applied to disaggregated data for seventeen industrial sectors. On the basis of pooled models, results about the significance and the stability of the unemployment trend against the actual rate, are confirmed. The unemployment trend coefficient is stable overtime and across sectors, while the coefficient of price expectations decreases significantly after 1975 in all industrial sectors. This change is related to the beginning of a phase of wage moderation and a turn to a degree of centralization of bargaining.; Chapter III analyzes the time series properties of the unemployment rate in Italy between 1960 and 1983 focusing on the implications of different detrending techniques. It is shown that autocorrelation functions of residuals from fitted linear trend, when the trend is segmented, have periodic behavior. In this case, the cyclical pattern in the autocorrelation function is spurious and it may lead to overestimate the importance of the cycle. These properties are similar to properties of random walks detrended by linear deterministic trends.