Wage Compression within the Firm

Marco Leonardi, Michele Pellizzari and Domenico Tabasso

No 9254, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: We study the distributional effect of a wage indexation mechanism - the 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: wage indexation; inequality; intra-firm bargaining; labor market institutions (search for similar items in EconPapers)
JEL-codes: J01 J31 J50 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2015-08
New Economics Papers: this item is included in nep-bec, nep-ger, nep-lma and nep-ltv
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Published - published in: Economic Journal, 2019, 129, 3256-3291.

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Working Paper: Wage compression within the firm (2015)
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