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Italy'S Industrial Great Depression: Fascist Price And Wage Policies

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  • Giordano, Claire
  • Piga, Gustavo
  • Trovato, Giovanni

Abstract

Industrial production and employment in Italy were hard hit by the Great Depression, and remained below trend until at least 1936. Few quantitative studies have been conducted on the causes of Italy's recession and slow recovery. Using monthly data, and reviving an aggregate supply model published in Bernanke and Carey [Quarterly Journal of Economics 111 (1996), 853–883], we empirically test whether Italy's 1930s industrial performance could be related to the Fascist wage and price policies, which, aiming at keeping workers' real wages constant, actually raised firms' labor costs, computed as nominal wages deflated by wholesale prices, hence stalling industrial production. We find evidence of a strong countercyclicality of real wages and of nominal wage stickiness in the period 1929–1936, which would confirm our hypothesis. Trade restrictions are found to play a smaller role in hindering industrial production than previously stated in the literature, whereas we confirm the weak transmission of financial turbulence to the real economy.

Suggested Citation

  • Giordano, Claire & Piga, Gustavo & Trovato, Giovanni, 2014. "Italy'S Industrial Great Depression: Fascist Price And Wage Policies," Macroeconomic Dynamics, Cambridge University Press, vol. 18(3), pages 689-720, April.
    • Handle: RePEc:cup:macdyn:v:18:y:2014:i:03:p:689-720_00
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    Cited by:

    1. Claire Giordano & Francesco Zollino, 2017. "Macroeconomic estimates of Italy's mark-ups in the long-run, 1861-2012," Quaderni di storia economica (Economic History Working Papers) 39, Bank of Italy, Economic Research and International Relations Area.
    2. Giacomo Gabbuti, 2020. "A Noi! Income Inequality and Italian Fascism: Evidence from Labour and Top Income Shares," Oxford Economic and Social History Working Papers _177, University of Oxford, Department of Economics.
    3. Giordano, Claire & Giugliano, Ferdinando, 2015. "A tale of two Fascisms: Labour productivity growth and competition policy in Italy, 1911–1951," Explorations in Economic History, Elsevier, vol. 55(C), pages 25-38.
    4. Claire Giordano & Francesco Zollino, 2021. "Long‐Run Factor Accumulation And Productivity Trends In Italy," Journal of Economic Surveys, Wiley Blackwell, vol. 35(3), pages 741-803, July.

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