Earnings dynamics and labor market reforms: The Italian case

Eran B. Hoffmann, Davide Malacrino, Luigi Pistaferri*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

7 Scopus citations

Abstract

This paper summarizes statistics on the key aspects of the distribution of earnings levels and earnings changes using administrative (social security) data from Italy between 1985 and 2016. During the time covered by our data, earnings inequality and earnings volatility increased, while earnings mobility did not change significantly. We connect these trends with some salient facts about the Italian labor market, in particular the labor market reforms of the 1990s and 2000s, which induced a substantial rise in fixed-term and part-time employment. The rise in part-time work explains much of the rise in earnings inequality, while the rise in fixed-term contracts explains much of the rise in volatility. Both of these trends affect the earnings distribution through hours worked: part-time jobs reduce hours worked within a week, while fixed-term contracts reduce the number of weeks worked during the year as well as increase their volatility. We only find weak evidence that fixed-term contracts represent a “stepping-stone” to permanent employment. Finally, we offer suggestive evidence that the labor market reforms contributed to the slowdown in labor productivity in Italy by delaying human capital accumulation (in the form of general and firm-specific experience) of recent cohorts.

Original languageAmerican English
Pages (from-to)1637-1667
Number of pages31
JournalQuantitative Economics
Volume13
Issue number4
DOIs
StatePublished - Nov 2022

Bibliographical note

Publisher Copyright:
Copyright © 2022 The Authors.

Keywords

  • D63
  • Income inequality
  • J11
  • J21
  • J24
  • J31
  • J41
  • J62
  • dual labor market
  • income mobility
  • income volatility
  • labor contracts

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