Maria Lamelas

The 1993 Income Policy Agreements (concertazione) reformed wage setting institutions in Italy. This change introduced a relevant ability in absorbing macroeconomic shocks and a curb in inflation- ary expectations, at the cost of stagnant aggregate real wages. The firm-level wage premia remained moderate and partially diffused, with an insufficient distribution of productivity gains, especially to smaller and Southern firms. On the other hand, concertazione between social partners favoured the spread of flexibility, better and before than regulation. Overall the North-South wage differentials slightly increased. Nowadays, after a few years of contrasts, Italy should resume concertazione, by mixing flexibility with a welfare state general reform