Patterns of Convergence (Divergence) in the Euro Area: Profitability Versus Cost and Price Indicators
In: Bank of Italy Occasional Paper No. 415
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In: Bank of Italy Occasional Paper No. 415
SSRN
Working paper
In: IZA journal of labor policy, Band 5, Heft 1
ISSN: 2193-9004
Abstract
This paper analyses wage dynamics in Italy in the last 25 years with a special focus on the recent recession. Despite the rather rigid Italian institutional setting, using linked employer-employee data we find that wage rigidities, albeit always present, have been subdued during the recessionary years. Using complementary data, we verify that, although we only observe daily and not hourly wages, overtime hours are not the main mechanism behind this enhanced wage flexibility. We document the presence of a trade-off between wage and employment adjustments: firms historically displaying higher levels of wage rigidities were less able to modify wages but exhibited higher turnover. A higher share of temporary workers, whose contractual relationship may be costlessly terminated and whose wages are therefore more frequently negotiated, served instead as a significant wage flexibility enhancing margin. More broadly, we find that firms of larger dimension, with a higher share of blue collar workers, or belonging to a sector where bonuses represent a large part of annual earnings were the ones displaying a higher level of wage flexibility.
JEL Classification
J31, J33
In: IZA Discussion Paper No. 11313
SSRN