Wage compression within the firm

Michele Pellizzari, Marco Leonardi and Domenico Tabasso

No 10770, CEPR Discussion Papers from C.E.P.R. Discussion Papers

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; Intra-firm bargaining; Labor market institutions; Wage indexation (search for similar items in EconPapers)
JEL-codes: J01 J31 J50 (search for similar items in EconPapers)
Date: 2015-08
New Economics Papers: this item is included in nep-ger and nep-hrm
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Citations: View citations in EconPapers (1)

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Working Paper: Wage Compression within the Firm (2015)
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