IDEAS home Printed from https://ideas.repec.org/a/eee/jpolmo/v30y2008i6p1017-1039.html
   My bibliography  Save this article

Changes in aggregate supply conditions in Italy: A small econometric model and its policy implications

Author

Listed:
  • Binotti, Annetta Maria
  • Ghiani, Enrico

Abstract

This paper examines aggregate supply conditions in Italy and how they changed from the 1970s to the late 1990s. Based on a VAR model for wages, prices, productivity, unemployment and exchange rate the cointegration properties of the data in nominal and real terms are analysed. Analysis is based on a model directly derived from the work of [Modigliani, F., & Padoa Schioppa, T. (1977). La politica economica in un'economia con salari indicizzati al 100 o più. Moneta e Credito, 117, 3-53]. Our results - giving empirical evidence for the existence of a link between labour market reform, employment and wage flexibilization - provide a major incentive for labour market reforms in Italy. The pressure for reintroducing mechanisms for partial wage purchasing power defence are resolutely discouraged. Normative aspects of 'concertation' should be positively reappraised as compared to wage aspects. Other notable policy implications are highlighted in the paper.

Suggested Citation

  • Binotti, Annetta Maria & Ghiani, Enrico, 2008. "Changes in aggregate supply conditions in Italy: A small econometric model and its policy implications," Journal of Policy Modeling, Elsevier, vol. 30(6), pages 1017-1039.
    • Handle: RePEc:eee:jpolmo:v:30:y:2008:i:6:p:1017-1039
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0161-8938(07)00134-2
    Download Restriction: Full text for ScienceDirect subscribers only
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Bruno Chiarini & Paolo Piselli, 1997. "Wage Setting, Wage Curve and Phillips Curve: The Italian evidence," Scottish Journal of Political Economy, Scottish Economic Society, vol. 44(5), pages 544-565, November.
    2. Olivier Blanchard & Francesco Giavazzi, 2003. "Macroeconomic Effects of Regulation and Deregulation in Goods and Labor Markets," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 118(3), pages 879-907.
    3. Layard, Richard & Nickell, Stephen & Jackman, Richard, 2005. "Unemployment: Macroeconomic Performance and the Labour Market," OUP Catalogue, Oxford University Press, number 9780199279173.
    4. Marcellino, M. & Mizon, G.E., 2001. "Small system modelling of real wages, inflation, unemployment and output per capita in Italy 1970-1994," Discussion Paper Series In Economics And Econometrics 0106, Economics Division, School of Social Sciences, University of Southampton.
    5. Marcellino, Massimiliano & Mizon, Grayham E., 2000. "Modelling shifts in the wage-price and unemployment-inflation relationships in Italy, Poland and the UK," Economic Modelling, Elsevier, vol. 17(3), pages 387-413, August.
    6. Marc Lombard, 2000. "Restrictive Macroeconomic Policies and Unemployment in the European Union," Review of Political Economy, Taylor & Francis Journals, vol. 12(3), pages 317-332.
    7. repec:bla:scotjp:v:44:y:1997:i:5:p:545-65 is not listed on IDEAS
    8. Bean, Charles R, 1994. "European Unemployment: A Survey," Journal of Economic Literature, American Economic Association, vol. 32(2), pages 573-619, June.
    9. A. W. Phillips, 1958. "The Relation Between Unemployment and the Rate of Change of Money Wage Rates in the United Kingdom, 1861–1957," Economica, London School of Economics and Political Science, vol. 25(100), pages 283-299, November.
    10. Carlin, Wendy & Soskice, David, 1990. "Macroeconomics and the Wage Bargain: A Modern Approach to Employment, Inflation, and the Exchange Rate," OUP Catalogue, Oxford University Press, number 9780198772446.
    11. Robert J. Gordon, 1997. "The Time-Varying NAIRU and Its Implications for Economic Policy," Journal of Economic Perspectives, American Economic Association, vol. 11(1), pages 11-32, Winter.
    12. Annetta Maria Binotti & Enrico Ghiani, 2005. "Changes of the aggregate supply conditions in Italy: a small econometric model of wages and prices dynamics," Discussion Papers 2005/55, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
    13. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
    14. Katarina Juselius, 2002. "Wage, Price, and Unemployment Dynamics and the Convergence to Purchasing Power Parity in the Euro Area," Discussion Papers 03-01, University of Copenhagen. Department of Economics.
    15. Massimiliano Marcellino & Grayham E. Mizon, 2001. "Small-system modelling of real wages, inflation, unemployment and output per capita in Italy 1970-1994," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 359-370.
    16. Lucrezia Reichlin, 1986. "Un approccio istituzionale alla determinazione del salario," ULB Institutional Repository 2013/10227, ULB -- Universite Libre de Bruxelles.
    17. Oliver J. Blanchard, 1997. "The Medium Run," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 28(2), pages 89-158.
    18. Roberto Golinelli, 1998. "Fatti stilizzati e metodi econometrici "moderni": una rivisitazione della curva di Phillips per l'Italia (1951-1996)," Politica economica, Società editrice il Mulino, issue 3, pages 411-446.
    19. Dag Kolsrud & Ragnar Nymoen, 1998. "Unemployment and the open economy wage-price spiral," Journal of Economic Studies, Emerald Group Publishing, vol. 25(6), pages 450-467, October.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Antonio Rodriguez-Gil, 2018. "Hysteresis and labour market institutions. Evidence from the UK and the Netherlands," Empirical Economics, Springer, vol. 55(4), pages 1985-2025, December.
    2. Doménech, Rafael & García, Juan Ramón & Ulloa, Camilo, 2018. "The effects of wage flexibility on activity and employment in Spain," Journal of Policy Modeling, Elsevier, vol. 40(6), pages 1200-1220.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Bardsen, Gunnar & Eitrheim, Oyvind & Jansen, Eilev S. & Nymoen, Ragnar, 2005. "The Econometrics of Macroeconomic Modelling," OUP Catalogue, Oxford University Press, number 9780199246502.
    2. Albert van der Horst, 2003. "Structural estimates of equilibrium unemployment in six OECD economies," CPB Discussion Paper 19, CPB Netherlands Bureau for Economic Policy Analysis.
    3. Eilev S. Jansen, 2004. "Modelling inflation in the Euro Area," Working Paper 2004/10, Norges Bank.
    4. Jim Malley & Thomas Moutos, 2001. "Capital Accumulation and Unemployment: A Tale of Two “Continents”," Scandinavian Journal of Economics, Wiley Blackwell, vol. 103(1), pages 79-99, March.
    5. Rita Duarte & Carlos Marques, 2013. "The dynamic effects of shocks to wages and prices in the United States and the Euro Area," Empirical Economics, Springer, vol. 44(2), pages 613-638, April.
    6. Roberto Golinelli, 1998. "Fatti stilizzati e metodi econometrici "moderni": una rivisitazione della curva di Phillips per l'Italia (1951-1996)," Politica economica, Società editrice il Mulino, issue 3, pages 411-446.
    7. Lynne Cockerell & Bill Russell, 1995. "Australian Wage and Price Inflation: 1971-1994," RBA Research Discussion Papers rdp9509, Reserve Bank of Australia.
    8. Gunnar Bårdsen & Stan Hurn & Zoë Mchugh, 2007. "Modelling Wages and Prices in Australia," The Economic Record, The Economic Society of Australia, vol. 83(261), pages 143-158, June.
    9. R. Golinelli, 1998. "Fatti stilizzati e metodi econometrici "Moderni": una rivalutazione della Curva di Phillips per l'Italia (1951-1996)," Working Papers 313, Dipartimento Scienze Economiche, Universita' di Bologna.
    10. Albert van der Horst, 2003. "Structural estimates of equilibrium unemployment in six OECD economies," CPB Discussion Paper 19.rdf, CPB Netherlands Bureau for Economic Policy Analysis.
    11. Rod Cross & Julia Darby & Jonathan Ireland, 1997. "Uncertainties Surrounding Natural Rate Estimates in the G7," Working Papers 9712, Business School - Economics, University of Glasgow.
    12. Eckhard Hein, 2002. "Monetary policy and wage bargaining in the EMU: restrictive ECB policies, high unemployment, nominal wage restraint and inflation above the target," Banca Nazionale del Lavoro Quarterly Review, Banca Nazionale del Lavoro, vol. 55(222), pages 299-337.
    13. repec:pra:mprapa:43050 is not listed on IDEAS
    14. Odile Chagny & Frédéric Reynès & Henri Sterdyniak, 2002. "The equilibrium rate of unemployment : a theoretical discussion and an empirical evaluation for six OECD countries," SciencePo Working papers Main hal-01027421, HAL.
    15. Anindya Banerjee, 2001. "Industry structure and the dynamics of price adjustment," Applied Economics, Taylor & Francis Journals, vol. 33(15), pages 1889-1901.
    16. Olivier Blanchard & Lawrence F. Katz, 1997. "What We Know and Do Not Know about the Natural Rate of Unemployment," Journal of Economic Perspectives, American Economic Association, vol. 11(1), pages 51-72, Winter.
    17. Bozani, Vasiliki & Drydakis, Nick, 2011. "Studying the NAIRU and its Implications," IZA Discussion Papers 6079, Institute of Labor Economics (IZA).
    18. Milas, Costas & Otero, Jesus G., 1999. "Identification And Estimation Of A Labour Market Model For The Tradeables Sector: The Greek Case," Economic Research Papers 269250, University of Warwick - Department of Economics.
    19. Aurélien Gaimon & Vincent Lapegue & Paola Veroni & Noé N'Semi & Frédéric Reynés & Maël Theulière, 2007. "Does the interaction between shocks and institutions solve the OECD unemployment puzzle ? A theoretical and empirical appraisal," Working Papers hal-03602950, HAL.
    20. Sujit Kapadia, 2003. "The Capital Stock and Equilibrium Unemployment: A New Theoretical Perspective," Economics Series Working Papers 181, University of Oxford, Department of Economics.
    21. Beyer, Andreas & Farmer, Roger E.A., 2007. "Natural rate doubts," Journal of Economic Dynamics and Control, Elsevier, vol. 31(3), pages 797-825, March.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jpolmo:v:30:y:2008:i:6:p:1017-1039. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/505735 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.