Cost of living, Centralized Wage Setting and Urban Wage Premia

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IZA Seminar

Place: Schaumburg-Lippe-Str. 9, 53113 Bonn

Date: 14.11.2017, 12:15 - 13:30


Presentation by 

Paolo Naticchioni (University of Rome 3)


This paper aims at estimating the extent of the urban wage premia in Italy, a country characterized by a centralized wage setting system and by a spatially heterogeneous cost of living.We make use of a unique administrative employer-employee database on the universe of the Italian workers provided by the Italian Social Security Institute, merged with the housing prices collected by Osservatorio del Mercato Immobiliare, used to compute a cost of living measure at the local level, for the 2005-2015 period. We implement a mincerian regression analysis using both nominal and real, in spatial terms, urban wage premia, controlling for unobserved individual heterogeneity and endogeneity issues. Our results confirm the presence of positive, although small, nominal urban wage premia and of negative, and not negligible, real urban wage premia: urban workers suffer a penalty in terms of real spatial wages. Our conclusions are robust to a number of robustness checks. To identify the role played by collective bargaining, we resort to a group of self-employed workers that is not covered by any form of collective bargaining scheme. The striking differences in the estimates of the urban wage premia between the two groups confirm that collective bargaining is one of the driving forces of the results of the paper.

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