Competitiveness and Wage Bargaining Reform in Italy

Kangur, Alvar

doi:10.5089/9781484347621.001

“…Akcigit et al (2018) argue that political connections adversely affected firm dynamics, innovation, and creative destruction in Italy, weighing on the economic growth. Moreover, wage growth outpaced productivity growth, contributing to high structural unemployment; see Kangur (2018). Easy access to finance pre-crisis boosted demand, but the double-dip recession earlier this decade and the subsequent tightening of credit conditions set Italy back further; see Doerr et al (2018), and Mohaddes et al (2017).…”

Section: Introductionmentioning

confidence: 99%

Italy: toward a growth-friendly fiscal reform

Andrle

¹

,

Hebous

²

,

Kangur

³

et al. 2020

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Published in late 2017, the Italian medium-term fiscal plan aims to achieve structural balance by 2020, although concrete, high-quality measures to meet the target are yet to be specified. This paper seeks to contribute to the discussion by (1) assessing spending patterns to identify areas for savings; (2) evaluating the pension system; (3) analyzing the scope for revenue rebalancing; and (4) putting forward a package of spending cuts and tax rebalancing that is growth friendly and inclusive, could have limited near-term output costs, and would achieve a notable reduction in public debt over the medium term. Such a package could help the authorities balance the need to bring down public debt and, thus, reduce vulnerabilities while supporting the economic recovery.

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“…This paper also complements the model-based analysis in Andrle at al. (2018) and Kangur (2018), which quantify the macroeconomic benefits of wage devaluation in Italy, among other structural reforms.…”

Section: Figure 1 Unit Labor Cost Capital Return and Investment Nomentioning

confidence: 99%

Labor Costs and Corporate Investment in Italy

2020

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The recovery of private investment in Italy has lagged its euro area peers over the past decade. This paper examines the role of elevated labor costs in hindering the recovery. Specifically, labor costs rose faster than labor productivity prior to the global financial crisis and have remained high since, weighing on firms’ profits, capital returns, and thus capacity to invest. Empirical analysis provides evidence for the impact of wages on investment at the sectoral and firm levels. Sectoral wage growth seems unrelated to sectoral productivity growth, but is negatively associated with investment. Firm-level data permit a better identification—by exploiting the interaction between sectoral wage growth (exogenous to the firm) and the lagged labor share of the firm. A 1 percent increase in real wages is estimated to cause a 1/3 percent fall in fixed capital. Profits absorb only ½ of the cost increase, pointing to the role of liquidity constraints. These results highlight the need for labor market reform to reinvigorate investment, and thus labor productivity and job creation.

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“…Akcigit et al (2018) argue that political connections adversely affected firm dynamics, innovation, and creative destruction in Italy, weighing on the economic growth. Moreover, wage growth outpaced productivity growth, contributing to high structural unemployment; see Kangur (2018). Easy access to finance pre-crisis boosted demand, but the double-dip recession earlier this decade and the subsequent tightening of credit conditions set Italy back further; see Doerr et al (2018), and Mohaddes et al (2017).…”

Section: Introductionmentioning

confidence: 99%

Italy: Toward a Growth-Friendly Fiscal Reform

Andrle¹,

Hebous²,

Kangur³

et al. 2018

Self Cite

View full text Add to dashboard Cite

Published in late 2017, the Italian medium-term fiscal plan aims to achieve structural balance by 2020, although concrete, high-quality measures to meet the target are yet to be specified. This paper seeks to contribute to the discussion by (1) assessing spending patterns to identify areas for savings; (2) evaluating the pension system; (3) analyzing the scope for revenue rebalancing; and (4) putting forward a package of spending cuts and tax rebalancing that is growth friendly and inclusive, could have limited near-term output costs, and would achieve a notable reduction in public debt over the medium term. Such a package could help the authorities balance the need to bring down public debt and, thus, reduce vulnerabilities while supporting the economic recovery.

show abstract

Competitiveness and Wage Bargaining Reform in Italy

Cited by 14 publications

References 21 publications

Italy: toward a growth-friendly fiscal reform

Italy: toward a growth-friendly fiscal reform

Labor Costs and Corporate Investment in Italy

Italy: Toward a Growth-Friendly Fiscal Reform

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