The Origins of Italy's Economic Difficulties: The Role of Industrial Relations and Labour Market Reforms

The paper investigates the origins of the poor performance of the Italian economy in terms of growth and productivity since the late 1990s. After a period of relatively low economic growth and high employment creation in the first part of the 200s, Italy was severly hit by the economic downturn started in 2009, with significant falls in output and employment, especially as regards youth. The period since the late 1990s has been marked by a number of labour market reforms, which increased flexibility in a selective manner by raising the number of non-standard contractual forms, as well as by growing pressures towards the decentralisation and fragmentation of the collective bargaining systems. By using available data on the collective bargaining structure and decentralised pay bargaining as well as on labour market and on business structure indicators, the paper highlights the relative importance of labour market and industrial relations institutions as opposed to more structural aspects of the business system in explaining the poor performance of the Italian economy in the latest two decades.