On the Response of Italian Wages to the Unemployment Rate

In this paper I assess the responsiveness of Italian wage rates to labor market conditions and show that the specific wage measure considered has important consequences for the results. The cyclical response of wages measured by National Accounts is dampened by a number of measurement issues; on the contrary, both wage rate changes negotiated at the central level and salary items set at the firm level are found to respond more strongly to unemployment. I conclude that the observed weak response of wage measures based on National Accounts does not reflect the lack of wage flexibility but rather the staggered and uncoordinated nature of wage negotiations