Working Paper: CEPR ID: DP10770
Authors: Marco Leonardi; Michele Pellizzari; Domenico Tabasso
Abstract: We study the distributional effect of a wage indexation mechanism - the \textit{Scala Mobile} (SM) - that heavily compressed the distribution of Italian wages during the 1970s and 1980s. The SM imposed large real wage increases at the bottom of the distribution and was essentially irrelevant for high-wage workers. We document that this mechanism triggered a strong redistribution within the firm. Skilled workers received lower wage adjustments when employed at firms with many unskilled workers and they tended to move towards more skill-intensive firms. We rationalize these findings with a simplified model of intra-firm bargaining with on-the-job search.
Keywords: inequality; intrafirm bargaining; labor market institutions; wage indexation
JEL Codes: J01; J31; J50
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| scala mobile (SM) (C59) | real wage increases for low-wage workers (J38) |
| scala mobile (SM) (C59) | lower wage adjustments for skilled workers (J31) |
| real wage increases for low-wage workers (J38) | wage compression for skilled workers (J31) |
| scala mobile (SM) (C59) | skilled worker mobility (J61) |