Ricerc@Sapienza

Italy experienced higher and more persistent rates of inflation than other Western economies during the Great Inflation (1971-1979). The policy response in Italy was prompted by the idea that wages were the carrier of inflation, and that the devaluation of the Lira was the only viable response to sustain firms’ profit rates and aggregate demand. We discuss the relevance of this policy approach and conclude, against the prevalent view, that the devaluation worsened the inflation spiral while wages played only a marginal role.

This article analyses the “Jobs Act”—the last structural reform implemented in Italy—framing it within the labour market reform process starting in 1997. Taking advantage of different data sources (administrative and labour force data), the investigation provides the following results. First, monetary incentives seem to play a key role in explaining the dynamics of new (or transformed) contracts. Second, new open-ended contracts are mostly driven by transformation. Third, a relevant share of new open-ended positions is characterized by part-time contracts.