Opting Out of Centralized Collective Bargaining: Evidence from Italy

Christian Dustmann, Chiara Giannetto, Lorenzo Incoronato, Chiara Lacava, Vincenzo Pezone, Raffaele Saggio and Benjamin Schoefer

No 34076, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: E02 E24 J0 J3 J5 J6 (search for similar items in EconPapers)
Date: 2025-07
Note: EFG LS PE
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