The Employment Effects of Collective Wage Bargaining

This study examines the wage and employment effects of Italian collective wage bargaining. It analyzes monthly data on the population of private-sector employees, matched with the information on contractual pay levels set by industry-wide agreements, which were bargained by the representatives of trade unions and employers at the national level. The research design exploited the generalized wage growth induced by changes in the contractual pay levels, whose timing and size differ across collective agreements. The specification adopted compared the outcomes of interest within sectors and geographical locations, and between workers subject to different collective contracts. The study results show that contractual wage growth increased the actual pay levels and had significant negative effects on employment. These employment effects were broadly consistent with the Hicks-Marshall laws and with several hypotheses of the traditional centralized wage bargaining models.