Wage indexation, openness and inflation uncertainty. The case of Italy

Abstract

This article uses annual data of the Italian economy to test the validity of the hypotheses of Friedman (1977) and Aizenman (1985) that the level of inflation uncertainty and the degree of openness of an economy have positive effects on the level of wage indexation. It was found that the estimated wage indexation equation supports the validity of the Aizenman hypothesis that the degree of openness of an economy has positive effects on the level of wage indexation. On the other hand, the regression of the wage indexation equation does not generally support the validity of the Friedman hypothesis that the level of inflation uncertainty has positive effects on the level of wage indexation