The Role of Wage Zones (Gabbie Salariali): Evidence from Italy’s Miracolo Economico

The paper measures the impact that Wage Zones (Gabbie Salariali), introduced in 1946, had on local development during the years of Italy's Miracolo Economico which was the period of impressive economic growth following the end of IIWW. Wage zones were mandatory wage differentials set at province level, indexing wages to inflation rate. The aim of the policy was to influence a balanced economic development of the Country based on different cost of living. The effect of the policy is identified by using Census municipality level data on growth of employment (as in Accetturo and de Blasio, 2011) exploiting both the cross-province and the time variations in wage differential envisaged under wage zones. The Identification is based on Regression Discontinuity Design (RDD) and the RDD strategy compare municipalities with different wage differential (low and high) across the province borders (the forcing variable in RDD is km from the province border as in Lalive, 2007). Results suggest that labour cost incentives are ineffective for low differential and have a positive effect on growth of employment for higher differential.