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.

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.

Employment Protection Legislation and the Size of Firms

The existing literature ignores the fact that in most European countries the strictness of Employment Protection Legislation (EPL) varies across the firm size distribution. In Italy firms are obliged to rehire an unfairly dismissed worker only if they employ more than 15 employees. Theoretically, the paper solves a baseline model of EPL with threshold effects, and shows that firms close to the threshold are characterized by an increase in inaction and by a reluctance to grow. Empirically, the paper estimates transition probability matrices of firm level employment using a longitudinal data set based on Italian Social Security (INPS) records, and finds two results. First, firms close to the 15 employees threshold experience an increase in persistence of 1.5 percent with respect to a baseline statistical model. Second, firms with 15 employees are more likely to move backward than upward. Finally, the paper tests the effect of a 1990 reform which tightened the regulation on individual dismissal only for small firms. It finds that the persistence of small firms relative to large firms increased significantly. Overall, these threshold effects are significant and robust, but quantitatively small.employment protection legislation, firm size

Employment Protection Legislation and the Size of Firms

The existing literature ignores the fact that in most European countries the strictness of Employment Protection Legislation (EPL) varies across the firm size distribution. In Italy firms are obliged to rehire an unfairly dismissed worker only if they employ more than 15 employees. Theoretically, the paper solves a baseline model of EPL with threshold effects, and shows that firms close to the threshold are characterized by an increase in inaction and by a reluctance to grow. Empirically, the paper estimates transition probability matrices on firm level employment using a longitudinal data set based on Italian Social Security (INPS) records, and finds two results. First, firms close to the 15 employees threshold experience an increase in persistence of 1.5 percent with respect to a baseline statistical model. Second, firms with 15 employees are more likely to move backward than upward. Finally, the paper tests the effect of a 1990 reform which tightened the regulation on individual dismissal only for small firms. It finds that the persistence of small firms relative to large firms increased significantly. Overall, these threshold effects are significant and robust, but quantitatively small.

Assessing the Impact on Grid Infrastructure of Electrification Pathways for the Italian Residential Sector

To achieve the decarbonization objectives described in the Paris Agreement, thermal appliances’ electrification is considered an essential factor. Unfortunately, the substitution of thermal appliances with electric alternatives will inevitably increase the load on the national electric system; thus, it is crucial to perform analyses to assess these policies’ impact. This paper, using as a reference the electrification pathways studied by Besagni et al. employing the MOIRAE (bottom-up MOdel to compute the energy consumption of the Italian REsidential sector) model, calculates the energy and power increase in the residential sector in 2030 due to the substitution of different thermal appliances and discusses potential policies to take into account the effect of their implementation on the Italian electric system. Even if the current generation capacity can sustain the electrification process without problems, investments will be needed to limit the possibility of congestions on transmission lines connecting the country’s northern and southern parts