The Employment E ects of Collective Bargaining

This paper studies the wage and employment e ects of Italian collective bargaining, analysing monthly data on the population of private-sector employees matched with information on contractual pay levels settled in industry-wide agreements bargained by trade unions' and employers' representatives at the national level. The research design exploits the generalised wage growth induced by changes in contractual pay levels, whose timing and size di ers across collective agreements, and it compares the outcomes of interest within sectors and geographical locations between workers subject to di erent contracts. The specification adopted controls for space-specific sectoral unobserved time-varying disturbances in a fully non-parametric way. Results show that a growth in contractual wages increases actual pay levels, determining at the same time negative effects on employment. The confidence interval of the implied own-price labour demand elasticity ranges between -0.4 and -1.2 in the preferred model specification. The interactions of this parameter with firm-level outcomes {value added per worker, size, the labour share and capital intensity{ are broadly consistent with Hicks-Marshall laws and with traditional models of centralized wage bargaining. Further analyses carefully document the dynamics of employment adjustments to contractual wage levels across time and assess the overall robustness of the results.