Performance-related pay or pay for participation? The case of Emilia Romagna

The income policy agreement of July 1993 - the so-called Accordo di Luglio - has considerably changed the industrial relations framework in Italy. The adoption of company agreements, linking workers' compensation to company performance, opened up a new phase in bargaining, increasing the growth of decentralised negotiation between workers' trade union organisations and companies. Previous empirical investigations have mainly analysed this phenomenon at national level, focussing on the factors behind this practice. Less attention has been devoted to the investigation of the diffusion of these negotiating practices at local level. The aim of this paper is to analyse this phenomenon at this level, investigating decentralised bargaining carded out in Emilia Romagna, one of the most industrialised and unionised regions of Italy. In particular, company bargaining on performance-related pay (PRP) and/or pay for participation (PFP) is analysed during the period 1994-1997 within this region. First of all, forms of agreement on PRP/PFP are investigated to find out the incentive, risk-sharing, and participation mechanisms as predicted by economic theory and embodied within each contract. Secondly, an econometric investigation is carried out to identify the variables that can explain their introduction.