Who benefited most from the re-regulation of labour markets which affected most of EU countries in the 1990s? The guidelines of the European Employment Strategy stress the need to promote flexibility combined with employment security and to ensure employment-friendly labour cost developments and wage-setting mechanisms [Ce05]. Despite higher occupation and employment rates, the outcome of 20 years of labour market flexibility is not clear yet. Flexibility allowed employers to face increasingly competitive markets, yet claims exist that contract flexibility was also used to cut labour and training costs [RaScHa00]. Contract flexibility has also been accused of driving large shares of younger workers and other groups of disadvantages employees to career paths characterised by temporary contracts, lower wages, poor working conditions, and low training. Literature on employment relationships has achieved important results, but several gaps still exist. The core idea of this research project is that wage dynamics and the use of flexible contracts are driven by the wage policy of a firm and by environmental conditions. Thus, the research programme jointly developed by a Portuguese and an Italian research unit, will take advantage of two national administrative linked employer-employee panel databases: Quadros do Pessoal, and Work Histories Italian Panel (WHIP). The research programme is based on a multidisciplinary, comparative, and pluralist approach and it is expected to produce new theoretical models and empirical evidence on the joint use of contract flexibility and targeted wage policies by firms.

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