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Wage rigidities and business cycle fluctuations: A linked employer-employee analysis

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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.

Language
Englisch

Bibliographic citation
Journal: IZA Journal of Labor Policy ; ISSN: 2193-9004 ; Volume: 5 ; Year: 2016 ; Issue: 22 ; Pages: 1-32 ; Heidelberg: Springer

Classification
Wirtschaft
Wage Level and Structure; Wage Differentials
Compensation Packages; Payment Methods
Subject
Wage dynamics
Negotiated wages

Event
Geistige Schöpfung
(who)
Adamopoulou, Effrosyni
Bobbio, Emmanuele
De Philippis, Marta
Giorgi, Federico
Event
Veröffentlichung
(who)
Springer
(where)
Heidelberg
(when)
2016

DOI
doi:10.1186/s40173-016-0078-5
Handle
Last update
10.03.2025, 11:42 AM CET

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Object type

  • Artikel

Associated

  • Adamopoulou, Effrosyni
  • Bobbio, Emmanuele
  • De Philippis, Marta
  • Giorgi, Federico
  • Springer

Time of origin

  • 2016

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