Rules vs. Bargaining: Pay Determination in the Italian Public Sector

Abstract

In most European countries a significant proportion of the total workforce is employed in the public sector of the economy and labour costs account for the largest proportion of total public expenditure. Italy is no exception to this rule since, as shown in national account statistics, in 1990 public employees represented 23 per cent of the total number of employees and the total wage bill was equal to 31 per cent of total public expenditure (net of interest). Yet, despite the importance of public sector employment for national economies there has been surprisingly little research done on the functioning of public sector labour markets and, more specifically, on wage determination (Ehrenberg and Schwarz, 1986). In general, empirical analyses of the public sector mainly focus upon public expenditure, with little regard for wage determination outcomes. Moreover, even when attention is paid to public wages, most of the evidence draws on research based on aggregate data, thus neglecting the heterogeneity which is likely to exist within the public sector itself.