Franco Modigliani and Ezio Tarantelli on Wage Moderation and Political Exchange: A Lesson to Be Learned in the New Age of Inflation

Abstract In this article, we highlight Franco Modigliani’s contribution to the socalled Tarantelli Proposal, which aimed to dismantle the full indexation of wages to prices. This proposal played a crucial role in the Italian political debate of the mid-1980s and ultimately led to the elimination of full indexation. The proposal was part of a more ambitious policy program. We thus also explore Modigliani’s support of Tarantelli’s policy project, centered on programmed inflation, social dialogue, and political exchange between wage moderation and the unions’ participation in the design and implementation of economic policy. Finally, we highlight the relevance of Modigliani’s and Tarantelli’s ideas today.