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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 so‐called “institutional indexation” have governed the determination of wages. Does incomes policy generate greater coordination in the process of wage formation? Does it cause greater co‐movement of wages, prices, labour productivity and unemployment? This paper aims to answer these questions with reference to one of the G8 economies.

After testing for unit root each component by using the ADF, Phillips and Perron, DF‐GLS and Zivot and Andrews statistics, the paper tests for co‐integration the so‐called WPYE model using different methods. The Engle and Granger approach is used to assess the impact of incomes policy on the speed of adjustment of real wages, productivity (and unemployment) to their equilibrium value, while the Gregory and Hansen procedure serves as a means to endogenously detect the presence of a regime shift. The paper estimates coefficients before and after the structural break.

Incomes policy based on the 1993 Protocol has caused a regime shift in the process of wage determination. The long‐run estimates of the WPYE model do not generate stationary residuals except when a dummy for 1993 is added. The share of wages over GDP reduces by about ten percentage points in the early 1990s and has stood at about 57 per cent since 1995. The link with productivity is close to one‐to‐one only before the break. The feedback mechanism, as measured by the coefficient of lagged residuals in short‐run estimates, is increased from −0.46 in the pre‐reform to −0.79 in the post‐reform period, suggesting that incomes policy has increased real wage flexibility indeed. In recent years the link between real wages and (very low) labour productivity growth has weakened. In a sense, incomes policy has introduced a new form of (upward) wage rigidity. Last but not least, incomes policy has changed the correlation with the unemployment rate from positive to not statistically significant.

Future developments will focus on disentangling the impact of incomes policy vis‐à‐vis other policy interventions on WPYE and on unemployment.

The analysis calls for a careful revision of the 1993 Protocol aimed at better protecting the purchasing power of real wages without losing control on inflation, and introducing growth‐generating mechanisms.

The paper studies the impact of incomes policy on WPYE and the Phillips curve by means of co‐integration and structural break analysis. It proposes to interpret the effect of incomes policy on the Phillips curve as changing the coefficient of the error correction mechanism that leads real wages to their long‐run equilibrium value.

This paper seeks to study gender wage differentials in Italy using first‐order predictions of monopsony‐search models. It compares empirical predictions of these models against other competing ones of wage determination in non‐competitive settings.

The paper looks at the empirical relevance of the model in terms of third degree wage discrimination among men and women by estimating the labour supply elasticity to the individual firm. It also tests the monopsony model using a “natural” experiment. Italian administrative longitudinal data from INPS are used.

Women have lower elasticity of labour supply to the individual firm: employer size regressions indicate larger effects (and consequently lower elasticity) for women as predicted by the monopsony model. Using the theoretical dynamic monopsony‐search model of Burdett and Mortensen, wage elasticity of separations and recruits confirm this result. Using relative men/women employment effects resulting from institutional changes in wage indexation mechanism (Scala Mobile), it is found that relative male employment responded differently in the two periods to the exogenous relative increase in the wage differential, as predicted by the monopsony model. Search frictions explain about 50 per cent of the gender differential.

No role for discrimination. Better controls for rents and union status would be needed. More rich firm data would be needed.

The paper is one of the few attempts of testing implications of monopsony models in unionised labour markets, such as Italy, after some important reforms in wage bargaining agreements. The change in institutional agreements is an interesting test for different theories of wage determination.

The purpose of this paper is to assess the role of the Protocol '93 bargaining model in favouring the slow‐down of the Italian economy and to design a correction.

The impact of the Protocol on factor income distribution is assessed through a deterministic dynamic model, and tested for the 1993‐2008 period. The paper explores theoretically and empirically the weakening of the incentives for both workers and employers to engage in fostering productivity.

In a macroeconomic setting with structural imbalance between the product and the labour markets reforms, the bargaining model has automatically increased up to 2002 the capital share in income, reducing the incentives for both social partners to accelerate productivity, as the labour share in income and the propensity to invest are co‐integrated (Johansen test). An analytical solution for correcting the bargaining distributive bias is proposed.

Further research should provide a picture of the different distributive behaviours of industrial sectors, particularly for industries exposed to/protected from international competition. The actual functioning of the new bargaining model (the Accordo Quadro of 2009) should also be assessed.

The bargaining model should be reformed so as to restore the right incentives for social partners. National industry‐wide wage bargaining should both incentivise and complement insufficient local bargaining.

The benefit of increased productivity and resumed growth has vast social implications, especially with reference to the sustainability of the welfare system.

The scientific literature has lacked any formal description of the dynamic operation of the Italian bargaining model, which is particularly valuable to both social partners and policy makers.

Decreased regulation of part-time work is one way a country responds to high rates of unemployment. Proponents of deregulation argue that a more flexible labor market is required to allow labor markets to clear. A more traditional response to high unemployment is change in monetary policy, where interest rates are lowered to stimulate the economy and increase rates of employment. Both policies have been tried in Europe, a good place to study the effects of the two policy responses, both because European unemployment has been high and because the trade off between monetary policy and the deregulation of part time work has varied from country to country. The establishment of the European monetary union (EMU) in 1999 created a natural experiment in which any one country’s ability to adjust its monetary policy was curtailed, creating pressure for deregulatory policies to come into play (Aaronovitch & Grahl, 1997; Pisani-Ferry, 1998).

The purpose of this paper is to introduce the special issue on “Labour, productivity and growth”.

The paper discusses the articles in the special issue, which investigate the main theme – labour, productivity and growth – from different points of view by employing a variety of econometric methods. These include improvement of the evaluation of the impact of labour market flexibility on economic performance, analysis of the macroeconomic law of decreasing returns to labour, a new panel co‐integration method, and a reinterpretation of co‐integration analysis to assess the impact of incomes policy. Institutional variables, in particular the system of industrial relations, are duly considered.

The papers in the special issue highlight different causes of sluggish economic (productivity) growth in Europe, in the light of not only traditional macroeconomic variables, such as total factor productivity and labour market flexibility, but also such factors as neo‐corporatist industrial relations and management practices, which are generally neglected in the literature.

The paper introduces a number of articles proposing innovations in the interpretation and application of a wide range of theoretical approaches and econometric methodologies. It also discusses several policy suggestions for fighting sluggish productivity growth, including investment in research and development, human capital, flexicurity, innovative industrial relations practices and high‐performance workplace practices also considered capable of affecting macroeconomic performance.

Purpose – Ascertaining the extent to which the generalized decline in union density, as well as the erosion in centralized bargaining structures and developments in other labor institutions, have contributed to rising within-country inequality.

Methodology – Econometric analysis of a newly developed dataset combining information on industrial relations and labor law, various dimensions of globalization, and controls for demand and supply of skilled labor for 51 Advanced, Central and Eastern European, Latin American, and Asian countries from the late 1980s to the early 2000s, followed by an analysis of 16 advanced countries over a longer time frame (from the late 1970s to the early 2000s).

Findings – In contrast to previous research, which finds labor institutions to be important determinants of more egalitarian wage or income distributions, the chapter finds that trade unionism and collective bargaining are no longer significantly associated with within-country inequality, except in the Central and Eastern European countries. These findings are interpreted as the result of trade unionism operating under more stringent structural constraints than in the past, partly as a result of globalization trends. In addition, despite much talk about welfare state crisis, welfare states, historically the result of labor's power and mobilization capacity, still play an important redistributive role, at least in advanced countries.

Practical implications – Union attempts at equalizing incomes by compressing market earnings seem ineffective and impractical in the current day and age. Unions should seek to increase the workers’ skill levels and promote an egalitarian transformation of the workplace. This type of “supply-side” egalitarianism is not a new strategy for unions, but is very much embedded in the unions’ DNA.

In all European countries (and in the USA as well) the 80's have been a period of innovation in pay policies.

While there has been intense debate in the empirical literature over the evolution of the college wage premium in the United States, its evolution in Europe has received little attention. This paper investigates the causes of the evolution of the college wage premium in 12 European countries from 1994 to 2009, assessing the relevance of the supply factor as a determinant of the college wage premium. I use cross-country variation in relative supply, demand, and labour market institutions to examine their effects on the trend in wage inequality. I address possible concerns of endogeneity of the relative supply using an IV strategy exploiting the differential legislations of university autonomy and their variations over time. Results show that the strong increase in the relative supply that European countries have experienced has decreased the college wage premium. The most relevant institution is the minimun wage, which significantly decreases college wage premium.

This paper aims to build on existing studies on the relationship between individual wages, age and experience, and provide new evidence on the determinants of wages in Italy.

Wage‐age profiles, which include cohort variables to capture generational differences in wages and are characterised by a changing‐over‐time structure, are estimated by fixed and random effects panel regressions. The analysis exploits a longitudinal dataset of administrative data on wages for the period 1985‐1999.

This paper shows that wage to age profiles for different cohorts of workers are not stable over time: although younger generations of Italian workers are benefiting from higher starting wages than older generations, they face the prospect of lower growth of future earnings. It also confirms the existence of a significant supply effect: the bigger the cohort relative to the active population, the smaller the cohort's gain in terms of wage levels. Finally, it captures the dependence of individual wages on aggregate labour market conditions: individual wages are shown to be negatively related to the unemployment rate and positively related to the union wage index.

Although the paper does not propose a novel theoretical approach to individual wage analysis, it demonstrates the benefits of a more integrated empirical analysis of individual wages.

The empirical findings suggest that it would be possible and useful to integrate the changing age profiles of individual wages with the estimation and projections of Italian aggregate industry and service sector average wages.

The paper provides new evidence on the determinants of the dynamics of individual wages through the estimation of time‐varying wage to age profiles of workers in the Italian industry and service sectors.

The purpose of this paper is to reflect on the developments which have characterized Italy’s industrial relations from post-war Fordism to neo-liberal hegemony and recent crisis, with a particular focus on the major changes occurred in the twenty-first century, especially those concerning concertative (tripartite) policy making between the government, the employers’ organizations and the trade unions.

This study is a conceptual paper which analysis of main development trends.

Italy’s industrial relations in the twenty-first century are characterized by ambivalent features which are the heritage of the past. These are summarized as follows: “collective autonomy” as a classical source of strength for trade unions and employers’ organization, on the one hand. On the other hand, a low level of legislative regulation and weak institutionalization, accompanied by little engagement in a generalized “participative-collaborative” model. Due to the instability in the socio-political setting in the twenty-first century, unions and employers encounter growing difficulties to affirm their common points of view and to build up stable institutions that could support cooperation between them. The result is a clear reversal of the assumptions that had formed the classical backdrop of the paradigm of Italy’s “political exchange.” This paradigm has long influenced the way in which the relationships between employers, trade unions and the state were conceived, especially during 1990s and, to some extent, during 2000s, that is the development of concertative (tripartite) policy making. However, since the end of 2000s, and particularly from 2010s onwards national governments have stated their intention to act independently of the choices made by the unions (and partially the employers). The outcome is the eclipse of concertation. The paper explores how the relationships among the main institutional actors such as the trade unions (and among the unions themselves), the employers, and the state and how politics have evolved, within a dynamic socio-political and economic context. These are the essential factors needed to understand Italy’s industrial relations in the twenty-first century.

It shows that understanding the relationship among the main institutional actors such as the trade unions (and among the unions themselves), the employers and the state and their politics is essential to understand the change occurred in contemporary Italy’s industrial relations.