The effects of monetary policy shocks on wage inequality: evidence from Italy

Elton Beqiraj, Stefano Di Bucchianico, Mario Di Serio and Michele Raitano

No 270, Working Papers in Public Economics from Department of Economics and Law, Sapienza University of Rome

Abstract: We use high-frequency Italian administrative data on private-sector employees to examine the impact of monetary policy shocks on wage inequality from 1999 to 2018. We estimate the impulse responses of various wage distribution indicators to exogenous monetary policy shocks, focusing on mean wages, key percentiles, and the Gini index, and distinguishing impacts on monthly gross earnings and full-time equivalent daily wages (our best proxy for unitary wages). Our findings reveal that expan-sionary monetary policy shocks significantly increase mean wages and reduce wage inequality, in addition to their positive effects on employment and economic activity. These distributional gains mainly accrue to workers in the medium-low segments of the wage distribution. Comparing monthly and unitary wages reveals markedly different responses, indicating that the intensive margin plays a crucial role. Two additional findings emerge when distinguishing workers' subgroups. First, workers employed in small and medium-sized firms benefit comparatively more from expansionary monetary shocks, pointing to a more substantial easing of firms' financial constraints. Second, the wage gap between blue-collar and white-collar workers narrows.

Keywords: Monetary policy shocks; Wage inequality; Employment levels; Administrative data; Labour market; Italy (search for similar items in EconPapers)
JEL-codes: D63 E50 E52 (search for similar items in EconPapers)
Pages: 24
Date: 2026-01
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