ABSTRACT
Since labour is a good of a special kind (Solow, 1990), the social relationship consisting in the exchange between labour services and a wage rate requires governance institutions. The role of institutions in the wage negotiation and in the determination of the disposable income distribution is commonly portrayed as composed by two phases. First, labour market institutions, such as legislation, the government and the organisations of workers and employers, operate ex ante with respect to the market, mainly by ruling on labour standards, on minimum wage (either legally enforced or imposed by unions), on employment protection legislation and to the organisational level (firm, industry, private or public sector) at which labour contracts are signed, so that labour market institutions directly and indirectly influence the determination of labour contracts. Second, the government operates ex post with respect to the market, by stabilisation policies aimed at correcting—mainly, through unemployment benefits—the macroeconomic failure consisting in a portion of the labour force remaining unemployed, and by the monetary transfers of social protection institutions.
