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Wage Equalization and Regional Misallocation: Evidence from Italian and German Provinces

Tito Boeri (), Andrea Ichino, Enrico Moretti and Johanna Posch

No 25612, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Italy and Germany have similar geographical differences in productivity – North more productive than South in Italy; West more productive than East in Germany – but have adopted different models of wage bargaining. Italy sets wages based on nationwide contracts that allow for limited local wage adjustments, while Germany has moved toward a more flexible system that allows for local bargaining. The Italian system has significant costs in terms of forgone aggregate earnings and employment because it generates a spatial equilibrium where workers queue for jobs in the South and remain unemployed while waiting. Our findings are relevant for other European countries.

JEL-codes: J0 R1 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eec, nep-geo and nep-ure
Date: 2019-02
Note: CH IFM ITI LS PE PR
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Working Paper: Wage Equalization and Regional Misallocation: Evidence from Italian and German Provinces (2019) Downloads
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