Paolo Sestito

Reservation Wages: Explaining Some Puzzling Regional Patterns

We use the Italian Labour Force Survey and the European Household Panel Survey to analyse the distribution of the reservation wages reported by job-seekers. In Italy, reservation wages appear to be higher in the South the low-income and high-unemployment area of the country than in the North and Centre. A similar, rather counterintuitive, pattern can also be found in Finland, France, and Spain. First, we show that the way in which these data are commonly collected generates double-selection bias. Second, we show that this bias has a strong effect on the estimation of the geographical pattern of reservation wages in many countries. The size of this bias is substantial in Italy. When controlling for it, reservation wages are at least 10 percent higher in the North and Centre than in the South.

Downward Wage Rigidity in Italy: Micro-Based Measures and Implications

We estimate the degree of downward wage rigidity in ItaIy using a micro-econometric model in which wages may be subject to both nominal and real downward rigidities. We lise the recently released Worker History Italian Panel (WHIP), an administrative individual-level data set covering both the high-inflation and automatic-indexation regime prevailing before the 1990s, and the regime that emerged after the indexation system was dismantled. Overall, we fmd a sizable amount of downward rigidities, downward real wage rigidity being much more relevant than downward nominal wage rigidity. aver time, downward rigidities bave become less important, with the reduction in real rigidities more than offsetting the rise in nominaI rigidities. This pattern is consistent with the labour market reforms Italy experienced and specifically with the abolition of the automatic price-indexation clause. In arder to verify the robustness of these results we aIso explore an identification strategy in which the reaI rigidity threshold, instead of being centred around price inflation far aII workers, is centred around the wage rise specificaIly dictated far each worker by the relevant industry-wide national collective contract. Our main results afe broadly confmned. Equipped with these more precisely identified measures of downward rigidities, we further explore their relationship with severaI labour market outcomes. We fmd that downward wage rigidities afe positively related to fmn turnover - which we interpret in terms of employment adjustments substituting far wage adjustments - and local unemployment rates - which hints at the macroeconomic relevance of our micro-based rigidity measures.

Technical Progres and Wage Dispersion in Italy: Evidence from Firm's Data

In this paper we test for the effect of technological progress on the labour demand and relative earnings by skill in Italy from 1986 to 1990. We consider a large panel of firms, about 36,000: the data allow us to construct a proxy of the use of new technology by each firm. Our main conclusions are that: (i) wage dispersion in Italy did not increase by the same extent as in the US and UK; (ii) technological progress led to a remarkable increase in the employment of skilled (captured in our data by white-collars) vis-a-vis blue-collar workers. However relative earnings did not experience a similar rise. We suggest that both a shift in the supply of skills and the features of the Italian wage bargaining system counteracted the rise in earnings dispersion.

The Sources of Unemployment Fluctuations: An Empirical Application to the Italian Case

The paper attempts at disentangling the main sources of the rise in the Italian unemployment rate over the last four decades on the basis of a small model a la Layard-Nickell, identified and estimated using a structural VAR approach. Unemployment movements are assumed to be driven by fully permanent and long-lived but temporary shocks. The component of unemployment related to current and lagged demand shocks deriving from the sVAR estimation is found to be relevant and quite persistent, its swings accounting for approximately a 4 percentage points change in the unemployment rate. In particular, while temporary by construction, this component shows an almost continuous increase since the beginning of the 1980s. Nonetheless, the results confirm that the bulk of the rise in Italian unemployment is to be attributed to non-demand factors: temporary (namely productivity and labour supply shocks) and fully permanent (namely shocks to the wage bargaining schedule). The latter explain a gradual rise of about 2.5 percentage points between the end of the 1960s and the beginning of the 1980s; over the last 15-20 years, however, they do not seem to have further contributed to the worsening of unemployment situation. JEL Classification: C51, E24, J60

NAIRU: Incomes Policy and Inflation

Italy has been one of the few industrial countries resorting to incomes policy in the current decade. Many Italian observers have attributed to this policy the remarkable slowdown in wage and price inflation. However, no apparent progress has been made concerning labour market unbalances, as the unemployment rate remains 4 percentage points above the already high level inherited from the 80s. This paper analyses this experience: it looks at the evidence of changes in the bargaining structure stemming from the incomes policies agreements, discusses their possible long run impact in terms of NAIRU and features of the inflationary process, presents a quantitative assessment of the specific contribution of those agreements to the inflation outcome. The analysis is carried out by looking at the presence of structural breaks in an aggregate-wage equation and resorting to counterfactual simulations of a large macroeconomic model (the Bank of Italy quarterly model). The empirical results ... L’Italie a ete l’un de rares pays a recourir a une politique des revenus pendant cette decennie. De nombreux observateurs italiens ont attribue a cette politique le remarquable ralentissement de l’inflation des salaire et des prix. Toutefois, aucun progres apparent n’a ete realise concernant les desequilibres du marche du travail, le taux de chomage restant 4 points plus haut que son niveau deja eleve des annees 80. Cet article analyse cette experience: il examine les effets du changement de l’organisation des negociations salariales lie aux accords de politiques des revenus, discute leurs eventuelles consequences a long terme sur le NAIRU et les caracteristiques du processus d’inflation et fournit une evaluation quantitative de la contribution de ces accords sur les performances d’inflation. L’analyse est effectuee a partir d’une recherche des ruptures structurelles de l’equation de salaire a un niveau agrege et de simulations a l’aide d’un modele macro-economique de grande taille ...

Hiring Incentives and/or Firing Cost Reduction? Evaluating the Impact of the 2015 Policies on the Italian Labour Market

In 2015 Italy adopted two different policies aimed at reducing labour market dualism and fostering employment: a generous permanent hiring subsidy and new regulations lowering firing costs and making them less uncertain. Using microdata for Veneto and exploiting some differences in the design of the policies, we evaluate the impact of each measure. Both contributed to double the monthly rate of conversion of fixed-term jobs into permanent positions. Moreover, around 40 per cent of new total gross hires with permanent job contracts occurred because of the incentives, whereas 5 per cent can be attributed to the new firing regulations. The new firing rules also made firms less reluctant to offer permanent job positions to yet untested workers. The possibility of benefitting from the incentives in case of a conversion also boosted temporary hiring, as it allowed firms to test for the quality of a job match.

The Quality of Temporary Work

Temporary work has been an important component of employment growth in Italy since the early 1990s. This is not surprising as Italy has substantially removed the obstacles against the use of temporary workers (henceforth ‘temps’ for brevity), while maintaining the rather strict firing regulations applying to permanent ones.

La Giostra Degli Insegnanti: Precariato E Turnover Nell’Ultimo Biennio (The Teachers’ Merry-Go-Round: Job Insecurity and Staff Turnover Over the Last 2 Years)

Italian Abstract: Si descrive l’evoluzione recente del precariato e del turnover nel sistema scolastico italiano, un sistema che ha tradizionalmente sofferto per i molti precari e l’elevata mobilità del personale. Su tali fenomeni ha influito il piano assunzionale straordinario del 2015 e il successivo piano straordinario di mobilità. Gli iscritti alle graduatorie a esaurimento (congelate da un decennio) si sono ridotti (da 124 a 47mila, a cui peraltro vanno aggiunti 34mila iscritti con riserva a seguito di sentenza del Consiglio di Stato). Il precariato è rimasto consistente: gli incarichi annuali sono passati da 118 a 126mila, dal 14,6 al 14,4% come quota della compagine complessiva del personale, nel frattempo cresciuta. Tra i docenti con incarico annuale sono cresciuti quelli, mediamente più giovani, iscritti nelle cosiddette graduatorie d’istituto, graduatorie per le quali permane la possibilità di accesso senza necessità di un passaggio per un tirocinio post universitario. La mobilità e il turnover, anche al netto del notevole numero di riassegnazioni del personale intervenute durante l’ultimo anno scolastico, si sono impennati. English Abstract: The paper illustrates the recent trends in the use of contract staff and in staff turnover in the Italian education system, traditionally plagued by high levels of job insecurity and turnover. The system has been affected by the extraordinary scheme for hiring permanent teachers in 2015 and a mobility and reallocation plan the following year. The number of people on the national list of untenured teachers (frozen about 10 years ago) shrank from 124,000 to 47,000 (to which we should, however, add another 34,000 teachers added to a reserve list following a judgment by the State Council). The use of contract staff remained largely unchanged: the number of annual job contracts rose from 118,000 to 126,000, and fell from 14.6 to 14.4% as a share of total staff, the numbers of which have grown in the meantime. The share of those on the local lists of supply teachers (yet not required to follow a postgraduate internship program) increased among teachers with a yearly contract, who are on average younger than before. Staff mobility and turnover rose sharply, regardless of problems with implementation which led to a considerable rise in staff reassignment in the last school year.

The Big Players in Italian Local Public Services - Constraints, Opportunities and Growth Strategies

One of the objectives of the reforms and liberalization of the last 15 years in local public services was to reduce the traditional fragmentation of production. This was to be achieved through restructuring that reduced inefficiencies and made it more possible to exploit economies of scale, thereby stimulating the emergence of national “big players”. In this paper we analyze the evolution and current position of the largest operators that have emerged in the different sectors of local public services. The aim is to identify factors that have helped or hindered the growth process. Through an analysis of twelve among the largest businesses we identify four evolutionary paths. In our view the main drivers have been: a) a presence in the energy sector (mainly due to its high profitability); b) a favourable local political framework; and c) a tradition of efficient internal organization and independence of local politics.

La determinazione dei salari in Italia: rigidità reali e nominali prima e dopo gli accordi di politica dei redditi

This paper estimates the extent of downward wage rigidity in Italy using a micro-econometric model and the recently released WHIP longitudinal data. The econometric approach distinguishes between downward nominal wage rigidity – i.e., the impediment to nominal wage cuts – and downward real wage rigidity – i.e., when nominal wages cannot grow by less than a minimum positive threshold. The model accounts for measurement error and flexibly specifies the counterfactual, rigidity-free wage change distribution. The period analyzed goes from the mid eighties to the end of the century, within which the 1992-1993 income agreements – with the abolition of the scala mobile – are situated. Overall, downward wage rigidity impacts on about 70% of the observations. However, in the periods following the income agreements, the impact of wage rigidity is reduced, in particular with regards to real rigidities (with a slight increase in nominal rigidities). In each sub-period, however, real rigidities prevail over nominal rigidities.