Pages 113-136 | Published online: 02 Jul 2010

Over the last decade, increasing attention has been given to the role of multiple bargaining schemes in wage setting systems. In attemping to evaluate the effects of two-level bargaining, the economic literature has placed the emphasis primarily on the inflationary danger that would be brought on by wage drift phenomena and, in general, on the problem that the positive effects of centralisation would be thwarted by demands made at the ‘local’ level. Much less attention has been given to the positive incentive role that profit sharing schemes may play in a multiple bargaining system. The situation in Italy appears to provide an interesting case for analysing this issue. There has in fact been a change in bargining regulations in 1993. The new system sets in motion an intensification of decentralised bargaining and the promotion of financial participation of employees in company results. The aim of this paper is firstly to examine the diffusion and the main features of the profit sharing experience in Italy after 1993, and, secondly, to test whether the rapid diffusion of profit-sharing schemes in Italy has been associated with the macro-benefits that can be expected from linking pay to local performance under partly decentralised bargaining-in particular limiting wage inflation

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