What Accounts For the Rise in Wage Inequality in Italy? Evidence from Administrative Matched Employer-Employee Data, 1985-1996

This paper provides new empirical evidence on the changes in the Italian wage distribution using administrative data from 1985 to 1996. Various statistical indicators are used to document a slight, but not negligible, increase in wage inequality. Standard decompositions of inequality indices by population subgroups shed light on the underlying causes of the observed distributional changes. Following Junh et al. (1993), econometric-type decompositions are also employed to disentangle the effects of observable quantities, prices and unobservable factors on inequality trends. The changing prices of observable characteristics are found to play a major role in accounting for the observed inequality increase.wage inequality, inequality decomposition, observable/unobservable inequality components.

Trends in the Italian Earnings Distribution, 1985-1996

Using a panel of administrative Italian data (source: INPS), this paper provides new empirical evidence on the changes in the earnings distribution that occurred in Italy over a relatively long time period (1985-1996). Various statistical indicators have been used to document a slight, but not negligible, increase in earnings inequality. Decompositions by population subgroups have shed light on the underlying causes of the observed distributional changes.

Shapley-Value Decompositions of Changes in Wage Distributions: A Note

This note shows how the Shapley-value can be applied to the regression-based methods that are often used to decompose changes in wage distributions. The method remedies the path-dependency exhibited by existing approaches that compute the contributions due to (i) changes in sample observable characteristics, (ii) changes in the return of characteristics, (iii) changes in the distribution of unobservable characteristics.regression-based decomposition methods, wage distribution, Shapley-value.

Poverty persistence in Britain: a multivariate analysis using the BHPS, 1991-1997

This paper uses longitudinal data from the BHPS, waves 1-7, to document low-income dynamics for individuals living in Britain in 1990s. Poverty entry and exit hazard rates are estimated and used to calculate the distribution of time spent poor over a six-year period. The results underline the importance of accounting for individuals repeated spells of poverty when measuring poverty persistence. Using discrete-time proportional hazard rate models, the paper then seeks to explain and forecast the observed chances of exit/entering poverty and the distribution of time spent in poverty for individuals with selected characteristics. The socio-economic correlates of the observed poverty patterns are investigated, including the relative importance of both household and individual characteristics

Earnings Mobility in Italy, 1985-1996

Using a panel of administrative Italian data (source: INPS), this paper provides new empirical evidence on the earnings mobility in Italy over a relatively long time period (1985-1996). Transition matrices have been used to document the extent to which Italian employees change their position in the earnings ladder from one year to the next. Separate computations for the population as a whole and for various subgroups have helped to shed light on the underlying causes of the observed patterns.

The Dynamics and Persistence of Poverty: Evidence from Italy

This article studies the dynamics and persistence of poverty in Italy during the nineties, using the ECHP, 1994-2001. Various definitions of poverty are analyzed in parallel, income poverty, subjective poverty and a multidimensional index of life-style deprivation. For each poverty definition, the hazard rates of leaving poverty and re-entering into it are estimated and combined to compute a measure of poverty persistence that takes account of individuals’ repeated spells in poverty. The estimates provide a picture of high poverty turnover for the majority of the Italian population, which is true for any of the alternative definitions of poverty considered. Thus movements in and out of poverty cannot be simply related to spurious transitions due to measurement errors in household income. Multivariate exit and re-entry rate regressions are then estimated jointly to allow for correlated unobserved heterogeneity. The results highlight the role of demographic characteristics, the insufficiencies of the existing social security system and, above all, the weaknesses of the Italian labor market in generating persistent poverty for certain subgroups of the population.Poverty dynamics, poverty persistence, repeated spells, duration models, Italy.

The Dynamics and Persistence of Poverty: Evidence from Italy

This article studies the dynamics and persistence of poverty in Italy during the nineties (1994-2001). Two definitions of poverty are analyzed: income poverty and a multidimensional index of life-style deprivation. For both definitions, poverty exit and re-entry rates are estimated and combined to compute measures of poverty persistence over multiple spells. A picture of high poverty turnover emerges according to either definition. Multi-spell hazard rate models have been estimated to assess the relative importance of several demographic and labor market characteristics in shaping poverty persistence at the individual level. The results highlight the weaknesses of the Italian labor market, the insufficiencies of the existing social security system and the deep territorial dualism in generating persistent poverty for certain groups of the population. We have stressed the ability of the two definitions to provide a generally consistent characterization of the poverty persistence risks faced by various population subgroups, but also the additional insights to be gained by analyzing the two definitions in parallel in a longitudinal context.Income poverty; multidimensional deprivation; poverty persistence; hazard-rate models; multiple spells

Rent-Sharing, Hold-up, and Wages: Evidence from Matched Panel Data

It is widely believed that rent-sharing reduces the incentives for investment when long term contracts are infeasible because some of the returns to sunk capital are captured by workers. We propose a simple test for the degree of hold-up based on the fraction of capital costs that are deducted from the quasi-rent that determines negotiated wages. We implement the test using a data set that combines Social Security earnings records for workers in the Veneto region of Italy with detailed financial information for employers. We find strong evidence of rent-sharing, with an elasticity of wages with respect to current profitability of the firm of 3-7%, arising mainly from firms in concentrated industries. On the other hand we find little evidence that bargaining lowers the return on investment. Instead, firm-level bargaining appears to split the rents after deducting the full cost of capital.rent-sharing, hold-up, employer-employee data

Are Temporary Jobs a Port of Entry into Permanent Employment? Evidence from Matched Employer-Employee Data

Are temporary jobs a port of entry into permanent employment? In this paper we argue that the answer crucially depends on the type of temporary contracts being considered, as the different contracts observed in practice are typically characterized by varying combinations of training, tax-incentives and EPL provisions. We base our empirical evidence on a longitudinal sample of labour market entrants in Italy, a country where a large number of temporary contracts coexist with a relatively high employment protection for standard employees. We estimate dynamic multinomial logit models with fixed effects, to allow for non-random sorting of workers into the different types of contracts. We show that the transition to permanent employment is more likely for individuals holding any type of temporary contracts than for the unemployed, thus broadly confirming the existence of port-of-entry effects. Yet, not all temporary contracts are the same: training contracts are the best port of entry, while freelance contracts are the worst. We also show that temporary contracts are generally a port-of-entry into a permanent position within the same employer, but not across firms, implying that little general-purpose training is gained while on temporary jobs. Moreover, the time needed for an internal transformation from a temporary to a permanent position appears rather long, suggesting that firms are likely to use (a sequence of) temporary contracts as a cost-reduction strategy, rather than as a screening device for newly hired workers.temporary jobs, port of entry, matched employer-employee data, dynamic multinomial logit models, state dependence, fixed effects

Quality of Life in Europe: Empirical evidence

This report is one of the outputs resulting from Workpackage 4, "Social and professional integration" of the WALQING project, SSH-CT-2009-244597 (www.walqing.eu).