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Opting Out of Centralized Collective Bargaining: Evidence from Italy

Author

Listed:
  • Christian Dustmann
  • Chiara Giannetto
  • Lorenzo Incoronato
  • Chiara Lacava
  • Vincenzo Pezone
  • Raffaele Saggio
  • Benjamin Schoefer

Abstract

This paper presents micro-empirical evidence on the effects of wage-setting decentralization. Our setting is Italy, where employers are required to comply with occupation- and industry-specific wage floors set by national collective bargaining agreements. We show that opting out of these agreements reduces wages but increases workers' employment and retention within firms. These effects are most pronounced in the more productive North, where the overall impact on workers' earnings is slightly positive. In contrast, in the South, wage losses outweigh employment gains, leading to a net decline in earnings. We also find that increased wage-setting flexibility is associated with higher firm survival rates in both regions. The regional divergence in outcomes aligns with a monopsony framework in which productivity and labor supply elasticities vary spatially.

Suggested Citation

  • Christian Dustmann & Chiara Giannetto & Lorenzo Incoronato & Chiara Lacava & Vincenzo Pezone & Raffaele Saggio & Benjamin Schoefer, 2025. "Opting Out of Centralized Collective Bargaining: Evidence from Italy," RFBerlin Discussion Paper Series 2543, Rockwool Foundation Berlin (RF Berlin).
    • Handle: RePEc:crm:wpaper:2543
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    Keywords

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    JEL classification:

    • E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J0 - Labor and Demographic Economics - - General
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • J5 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining
    • J6 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers

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