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The growth of Italian exports has lagged that of euro area peers. Against the backdrop of unit labor costs that have risen faster than those in euro area peers, this paper examines whether there is a competitiveness challenge in Italy and evaluates the framework of wage bargaining. Wages are set at the sectoral level and extended nationally. However, they do not respond well to firm-specific productivity, regional disparities, or skill mismatches. Nominally rigid wages have also implied adjustment through lower profits and employment. Wage developments explain about 45 percent of the manufacturing unit labor cost gap with Germany. In a search-and-match DSGE model of the Italian labor market, this paper finds substantial gains from moving from sectoral- to firm-level wage setting of at least 3.5 percentage points lower unemployment (or higher employment) rate and a notable improvement in Italy’s competitiveness over the medium term.

Exports and Imports --- Finance: General --- Labor --- Production and Operations Management --- Forecasting and Other Model Applications --- Quantitative Policy Modeling --- Employment --- Unemployment --- Wages --- Intergenerational Income Distribution --- Aggregate Human Capital --- Aggregate Labor Productivity --- Price Level --- Inflation --- Deflation --- Empirical Studies of Trade --- Trade and Labor Market Interactions --- Open Economy Macroeconomics --- Wage Level and Structure --- Wage Differentials --- Trade Unions: Objectives, Structure, and Effects --- Dispute Resolution: Strikes, Arbitration, and Mediation --- Collective Bargaining --- Unemployment: Models, Duration, Incidence, and Job Search --- Wages, Compensation, and Labor Costs: General --- Trade: General --- Macroeconomics: Production --- Demand and Supply of Labor: General --- General Financial Markets: General (includes Measurement and Data) --- Labour --- income economics --- International economics --- Macroeconomics --- Finance --- Exports --- Productivity --- Labor markets --- Competition --- International trade --- Production --- Financial markets --- Industrial productivity --- Labor market --- Italy --- Income economics

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Most macroeconomic models assume that aggregate output is generated by a specification for the production function with total physical capital as a key input. Implicitly this assumes that private and public capital stocks are perfect substitutes. In this paper we test this assumption by estimating a nested-CES production function whereas the two types of capital are considered separately along with labor as inputs. The estimation is based on our newly developed dataset on public and private capital stocks for 151 countries over a period of 1960-2014 consistent with Penn World Table version 9. We find evidence against perfect substitutability between public and private capital, especially for emerging and LIDCs, with the point estimate of the elasticity of substitution estimated closely around 3.

Investments: General --- Investments: Stocks --- Labor --- Macroeconomics --- Public Finance --- Macroeconomic Analyses of Economic Development --- Economic Development: Financial Markets --- Saving and Capital Investment --- Corporate Finance and Governance --- Fiscal and Monetary Policy in Development --- Pension Funds --- Non-bank Financial Institutions --- Financial Instruments --- Institutional Investors --- National Government Expenditures and Related Policies: Infrastructures --- Other Public Investment and Capital Stock --- Labor Economics: General --- Investment --- Capital --- Intangible Capital --- Capacity --- Human Capital --- Skills --- Occupational Choice --- Labor Productivity --- Investment & securities --- Labour --- income economics --- Public finance & taxation --- Stocks --- Public investment and public-private partnerships (PPP) --- Private investment --- Human capital --- Financial institutions --- Expenditure --- National accounts --- Public-private sector cooperation --- Labor economics --- Saving and investment --- United States --- Income economics

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The Greek pension system has been costly, complex, and distortive, which has contributed to Greece’s fiscal problems and discouraged labor force participation. Several attempts to reform the system faltered due to lack of implementation, pushback by vested interests, and court rulings leading to reversals. A series of reforms introduced throughout 2015–17 unified benefit and contribution rules, removed several distortions and reduced fragmentation and costs. If fully implemented throughout the long-term, these reforms can go a long way towards enhancing the pension system affordability. However, reforms faced setbacks and fell short of creating stronger incentives to build long contribution histories, to deliver sustainable growth by improving the fiscal policy mix, and to ensure fairness and equitable burden sharing across generations and interest groups. Policy priorities should aim towards fully implementing the 2015–17 reforms and complementing them with additional reforms to address these remaining objectives.

Macroeconomics --- Economics: General --- Public Finance --- Labor --- Demography --- Fiscal Policy --- Social Security and Public Pensions --- Demographic Trends, Macroeconomic Effects, and Forecasts --- Retirement --- Retirement Policies --- Nonwage Labor Costs and Benefits --- Private Pensions --- Economics of the Elderly --- Economics of the Handicapped --- Non-labor Market Discrimination --- Wages, Compensation, and Labor Costs: General --- Economic & financial crises & disasters --- Economics of specific sectors --- Pensions --- Labour --- income economics --- Population & demography --- Pension spending --- Expenditure --- Aging --- Population and demographics --- Wages --- Currency crises --- Informal sector --- Economics --- Population aging --- Greece

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On the Substitution of Private and Public Capital in Production.

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Italy: Toward a Growth-Friendly Fiscal Reform.

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