Title: Alternative theories of wage determination : the case of Italy
Abstract: This thesis is an empirical study of determination mechanisms in the context of the Italian economy. The research presented here addresses a number of issues concerning theories of determination, and investigates their relevance for a better understanding of the functioning of labour markets. In particular, the thesis intends to evaluate the adequacy of traditional competitive theory for the explanation of several labour market phenomena.
The approach adopted uses econometric techniques and micro-data (at the individual level) to investigate the determinants of pay levels and the structure of wages in Italian manufacturing industry.
The vast literature on determination of the post-war era extensively documented the existence of large and persistent differentials among industries and workers of comparable skills. The empirical evidence analysed in this work suggests that the structure of relative industry wages is very stable over-time. The results obtained provide no evidence in support of the view that dispersion can be explained by either unmeasured workers characteristics or compensating differentials. Conversely, the pattern of industry-occupation differentials seems to suggest that rent sharing mechanisms and fairness considerations are important determinants of levels. A significant dispersion was also detected among firms operating in the same sector. Firm size, product market conditions and firm's financial structure, through their effect on ability-to-pay, proved to be central features of firms' pay policies. Firm's profitability, in contrast with the view commonly held, showed a positive impact on levels.
A common finding of empirical studies on wages is that women are paid less than comparable male workers. Our findings for the Italian economy indicate that, although male/female pay differences - on average - are not large in magnitude, nevertheless women tend to be segregated in low pay jobs with poor advancement prospects.
In Italy, formation is characterised by a two-stage procedure. In the first stage, negotiation between trade unions and employers set a level which can be subsequently modified, in the second stage, by overpayments at the firm level. This second stage originates the so called wage drift. The analysis in this thesis considers the empirical relevance of drift, in pay setting mechanisms, for productivity and bargained levels. A positive effect of overpayments on productivity was detected and an efficiency interpretation is offered. Finns' discretionary payments were shown to be shaped so as to reduce shirking, increase effort and retain high quality workers.
Finally, if labour relationships are characterised by long term employer- employee attachment then the traditional spot” labour market characterisation does not appear well suited to explain job tenure. A career labour market interpretation, where internal rather than external mobility is important, can provide a better framework of analysis. The analysis of the determinants of job duration showed that: high educational attainments, work experience and firm size - ceteris paribus - have a negative impact on the probability of job separation.
Publication Year: 1991
Publication Date: 1991-09-01
Language: en
Type: dissertation
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