Working Paper: CEPR ID: DP811
Authors: Giorgio Brunello
Abstract: The purpose of this paper is to evaluate the relative importance of deviations from competitive behaviour, both in product and in labour markets, in the determination of sectoral employment growth in Italy during the last forty years (1951-90). This is done with the help of a two-sector descriptive framework that brings together both productivity differentials and non-competitive behaviour in the product and in the labour markets.Simulations of the model suggest that changes in labour markets were quantitatively more important than changes in product markets in the determination of sectoral employment growth. In particular, if our measures of product and labour market non-competitive behaviour before the first oil shock had remained constant after 1973, our simulations suggest that, on average, industrial and service employment would have been, respectively, higher and lower than observed. More precisely, if we use the average wage paid to employees to measure the returns from self-employment, it turns out that industrial employment would have been, on average, 13% higher and that service employment would have been, on average, 13% lower. This is equivalent to about 750,000 additional employees in industry and to about one million fewer employees in services.
Keywords: Wage Bargaining; Employment; Imperfect Competition; Italy
JEL Codes: E0; J51
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| noncompetitive behavior in labor markets (J79) | sectoral employment growth (J49) |
| noncompetitive behavior in product markets (L13) | sectoral employment growth (J49) |
| labor market dynamics (J29) | sectoral employment growth (J49) |
| product market dynamics (D49) | sectoral employment growth (J49) |
| changes in labor market markups (J49) | sectoral employment dynamics (J69) |
| changes in product market markups (L11) | sectoral employment dynamics (J69) |