Roberto Torrini

Capital, Labour and Productivity: What Role Do They Play in the Potential Gpd Weakness of France, Germany and Italy?

The paper analyses the recent supply side developments in France, Germany, and Italy by employing a non-parametric approach to estimate potential GDP. The analysis reveals marked heterogeneity among the three countries with regard to the contribution made by labour input. Where similarities can be found, however, are in the slowdown of accumulation activity and in the pronounced worsening of total factor productivity. The paper is rounded out by estimates of some measures of wage pressures and of profitability in order to assess the role played by the movements of relative input prices in the intensity of use of primary factors in the production process.

Firm Size Distribution and EPL in Italy

We study the role of employment protection legislation (EPL) in explaining the relative small average size of Italian firms. We construct a simple model that shows that the smooth relation between size and growth probability is disturbed in proximity of the thresholds at which EPL applies di.erentially. We use a comprehensive dataset of all Italian firms between 1986 and 1998 to estimate the e.ects of EPL in terms of discouraging small firms from growing. We then construct a stochastic transition matrix for firm size that, together with the estimates, allows for a quantitative evaluation of the e.ects of EPL in the long run. Our results show that EPL does influence firm size distribution, but that its e.ects are quantitatively modest: average firm size would increase by less than 1% when removing the threshold e.ect. In terms of policy, these findings suggest that changes in EPL are not likely to have a large impact on the propensity of small firms to grow

Changing Institutions in the European Market: The Impact on Mark-Ups and Rents Allocation

In this paper, we investigate whether the completion of the Single Market Programme has enhanced competition on the product markets across European countries, while taking into account the companion structural reforms undertaken by the member countries. In particular, since the Single Market Programme went hand in hand with major reforms in the labour market and in the institutional setting of important industries (i.e. network industries), we test for a break in both mark-ups and the division of rent between capital and labour. For this purpose we encompass efficient bargaining in the labour market in both our theoretical and empirical model. Using industry data for ten EU countries we find that, without controlling for changes in the rent sharing, mark-up estimates tend to increase in the 1990s. However, once we assume efficient bargaining in the labour market, mark-ups remain virtually unchanged or even decrease in some sectors or groups of countries; the result stems from the declining shares of rents accruing to workers owing to a decline in their bargaining power. Without controlling for this development, a rise in firms’ profitability due to rent reallocation could be wrongly interpreted as an increase in market power. At the industry level the evidence is particularly strong for high and medium-tech manufacturing, for construction and for those activities that went through deep institutional changes and privatization programmes.

The generation gap: a cohort analysis of earnings levels, dispersion and initial labor market conditions in Italy, 1974-2014

We discuss entry wages, career patterns and inequality developments of successive cohorts who have entered the Italian labour market between 1974 and 2014. We find that entry wages started to decline around the mid-1990s; the drop continued at least until the onset of the global financial crisis, seemingly slowing down thereafter. This pattern cannot be explained by changes in observable job characteristics. Falling entry wages have not been accompanied by faster subsequent career paths; rather, subsequent career paths have increasingly featured rising earnings dispersion due to both increased workers heterogeneity and greater temporary earnings instability. We relate such developments to the changes in labour market institutions that took place between the early 1990s and the mid-2000s.

Chapter 9 The EU-wide Earnings Distribution

This chapter studies the distribution of labour earnings among employees within the EU using data from Wave 2007-1 of the EU-SILC. The ranking of countries by median full-time equivalent monthly gross earnings shows Eastern European nations at the bottom and Luxembourg at the top; earnings differences are sizeable, both across and within countries. Taking the euro area and the EU-25 as a whole, inequality is higher when earnings are measured in euro at market exchange rates than at purchasing power parities. Unsurprisingly, the wage distribution is narrower in the euro area than in the EU-25, which includes the poorer Eastern European countries joining the Union in 2004. The higher inequality observed for the EU-25 is largely attributable to between-country differences, which in turn reflect differences in returns to individual attributes more than in workforce composition.