The institutional wage adjustment to import competition: evidence from the Italian collective bargaining system
Alessia Matano (Department of Economy and Law, University of Roma “La Sapienza” and AQR-IREA, Universitat de Barcelona); Paolo Naticchioni (University of Rome Tre and INPS-DCSR); Francesco Vona (OFCE Sciences-Po, SKEMA Business School, University Côte d’Azur GREDEG, Department of Environmental Science and Policy, University of Milan, and FEEM)
F16, J24, J31, J50
Oxford Economic Papers, Volume 75, Issue 3, July 2023
A growing body of research has contributed to understanding the labour market and political effects of globalization. This article explores an overlooked feature of trade-induced adjustments in the labour market: the institutional aspect. We take advantage of the Italian collectively bargained minimum wage system, which is based on a two-tier structure, whereby the first tier entails setting minimum wages at the national contract level. Using an instrumental variable strategy and exploiting variations in contract-level exposure to trade, we find for the 1995–2003 period that, on average, the surge in imports decreased contractual minimum wages by 1.5%. This impact increases in the share of unskilled workers employed in the contract. This negative institutional effect contrasts with a non-significant effect of trade on total wages, with the latter becoming positive and large only for highly skilled workers.