Dynamic Models of Labour Demand in the Italian Industrial Sector: Theories and Evidence from Panel Data

The main of this paper is to set up a model able to embody some peculiarity of the Italian unionised labour market with regard to employment determination. The impact of unions on employment is measured both through direct and indirect effects via wages. Moreover, the theoretical framework used embodies a variety of labour demand models and considers the implications of efficiency wage theories, the effects of financial factors and the assumption of imperfect competition in the good market. The empirical results are based on a sample of 45 Italian firms over the period 1958-1985. We present a general model, and three others selected on the basis of the ownership of the firm (private, state owned and foreign). The main results show that employment depends negatively on both own wage and wage relative to outside opportunities. There is also evidence of financial factor effects on employment.