The Legacy of 1969? Essays on the Historical Roots of Italy's Economic Decline, 1960s-2000s

The thesis investigates the historical causes of Italy's recent economic decline, focusing on structural changes in the Italian economy between the 1960s and the 1980s. The overarching hypothesis of the thesis proposes that a shift in labour unions' bargaining preferences in favour of egalitarianism provoked radical changes in the wage level and the wage distribution for blue-collar workers after 1969, altering relative factor prices for firms and modifying incentives for individuals. I first quantify this shift in historical perspective by reconstructing new series of contractual and effective wages across twenty industries between the 1950s and the 1990s. After having established the significance of the shift, I test the implications for this hypothesis, exploring separate specific hypothesis. With respect to firms, I hypothesize that the changes in relative wages between high-skill and low-skill workers incentivized the substitution between production factors, promoting capital deepening and an increase in outsourcing practices among manufacturing firms. These organisational changes also had repercussions at the aggregate level, by sustaining an efflorescence of small manufacturing firms during the 1970s, albeit with significant sectoral heterogeneity. With respect to individuals, I hypothesize that the increase in entry-level contractual wages and the compression of wage differentials reduced incentives to enrol in upper secondary education, especially impacting schools that provided technical education for manufacturing jobs. This would explain the stagnation in male educational attainment between the 1970s and the 1980s, which continues to affect Italy's growth potential through skill mismatch. Finally, I explore the effect of a spatial equalization of contractual minimum wages-which accompanied the egalitarian wage push-on internal migration flows. I hypothesize that the nominal equalization of wages reduced incentives to migrate from low-income regions, contributing to spatial imbalances in unemployment rates. The thesis thus uncovers and discusses connections between the critical juncture of 1969 and some structural weaknesses that have characterized the Italian economy in the past decades.