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Searching for Long Run Equilibrium Relationships in the Italian Labour Market: a Cointegrated VAR Approach

Lorenzo Corsini () and Marco Guerrazzi ()

Discussion Papers from Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy

Abstract: The aim of this paper is to empirically search for long run relationships in the Italian labour market, assessing the role that institutional factors played in it. In a sense, we search for the existence of a state of the economy where the labour market variables (some of which should measure the strength of institutional factors) are in a long run equilibrium. Having to deal with institutional factors, such as the presence of unions in the wage bargaining process, it came natural to use a model with New Keynesian features as theoretical background. Since we wanted to estimate equilibrium relationships, we chose the cointegrated VAR approach as estimation technique. Such approach is suited to separate long-run equilibrium relationships from short run transient dynamics, and to test the existence and the magnitude of equilibrium restoring forces. In the theoretical model we use, great emphasis is given to the variable that measures union power. Therefore, in the empirical analysis we give much attention to this variable, trying different proxies to measure it, and to assess the role it played in the Italian labour market functioning.

Keywords: New Keynesian Economics; Wage Bargaining; Union Power; Cointegrated VAR (search for similar items in EconPapers)
JEL-codes: C32 J51 (search for similar items in EconPapers)
Date: 2004-01-01
Note: ISSN 2039-1854
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Handle: RePEc:pie:dsedps:2004/43