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Labour market power and the quest for an optimal minimum wage: evidence from Italy

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  • Mauro Caselli
  • Jasmine Mondolo
  • Stefano Schiavo

Abstract

This study investigates the recent trends in labour market power in Italy and assesses the impact of a potential minimum wage using a large sample of manufacturing firms. We show that, despite an average shift of labour market power from companies to workers, monopsony power is still widespread, especially in some sectors and regions. The introduction of a minimum wage would be beneficial to workers and the economy as it reduces the monopsony power of highly productive firms paying low wages; however, it may also have a negative impact, since firms with low wages and low labour productivity may react by reducing the number of their employees or even by exiting the market. Finally, we find that an optimal minimum wage, which minimizes the negative effect and maximizes the positive effect for the economy, ranges between 8.25 and 9.65 euro per hour.

Suggested Citation

  • Mauro Caselli & Jasmine Mondolo & Stefano Schiavo, 2023. "Labour market power and the quest for an optimal minimum wage: evidence from Italy," Applied Economics, Taylor & Francis Journals, vol. 55(15), pages 1713-1727, March.
    • Handle: RePEc:taf:applec:v:55:y:2023:i:15:p:1713-1727
    DOI: 10.1080/00036846.2022.2099523
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    Cited by:

    1. Li, Ningning & Shi, Hongqi & Wang, Yongjin & Zhang, Jie, 2026. "Mobility and monopsony power in labor market: Evidence from China's hukou reform," Economic Analysis and Policy, Elsevier, vol. 89(C), pages 472-489.
    2. Traverso, Silvio & Vatiero, Massimiliano & Zaninotto, Enrico, 2024. "Automation and flexible labor contracts: Firm-level evidence from Italy," GLO Discussion Paper Series 1425, Global Labor Organization (GLO).
    3. Mauro Caselli & Silvio Traverso, 2026. "Under pressure: trade competition from low-wage countries and demand for immigrant labor in Italy," Journal of Population Economics, Springer;European Society for Population Economics, vol. 39(1), pages 1-29, March.
    4. Dalmazzo, Alberto & Leombruni, Roberto & Razzolini, Tiziano, 2023. "Anticipation Effects of EU Accession on Immigrants' Labour Market Outcomes," IZA Discussion Papers 16614, IZA Network @ LISER.
    5. Gmeiner, Michael & Gmeiner, Robert, 2023. "Estimating the employment effect of the minimum wage through variation in compliance: evidence from five US states," LSE Research Online Documents on Economics 121277, London School of Economics and Political Science, LSE Library.

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