Aggiustamento dei salari, indicizzazione e inflazione : un'analisi empirica per l'industria in senso stretto, 1963-85.

This paper proposes an empirical analysis of the relationship between wage indexation, discretionary wage adjustment and inflation in Italy, by specifying and estimating (on quarterly time series for 1963-85) a short-term model for the price-wage nexus in the industrial sector of a small open economy. The influence of wage indexing is considered in the light of the concept of optimum degree of indexation (for which empirical estimates are provided), and the links between indexing and discretionary wage adjustment. The main conclusion is that, at least since 1973, institutional interventions on the degree of indexation seem to be only partially determined by variations in the optimum degree of indexation. As a result, wage indexing has increased price variance without this being justified by the fact that wages are closer on average to their equilibrium level. On the other hand, the estimates show no impact of wage indexing on the average inflation rate, as price expectations come into wage determination only to the extent of the complement to one of the degree of wage indexation.