Wage Determination in Post‐War Italy

ABSTRACT: A bargaining model is proposed and tested in order to explain the irrelevance of the general labour market conditions to wage settlements in the post‐war Italian economy. The model is a “right to manage model”, but the solution cannot be improved, being both on the labour demand curve and on the contract curve. The reason for such an outcome is that both firms and unions have priorities, and distinguish the labour force between insiders and outsiders. Different definitions of insiders are used, but in the postwar Italian economy the employees and ex‐employees of the industrial sector appear to be the share of the labour force which have been better protected by both contractual parties.