Does national collective wage bargaining affect the financial wealth of employed people?

This paper aims to estimate the effect of collective wage bargaining on actual pay levels, focusing on its influence on geographic wage dispersion during the years 1995-2020. The tendency of collective bargaining to compress wage differences across regions with different costs of living, as measured by the Purchasing Power Parity index, can have an influence on real wage inequalities. Our main goal is to analyse two categories, following Belloc et al.(2019). The first is employees, who are most likely affected by the collective wage agreements. The second is the self-employed people, which those regulations exclude. When considering both employees and self-employed people, our results display a decrease in wages as the local agglomeration increases. However, this disadvantage is offset as soon as we isolate for self-employed people: from -2.6% we move to an advantage of 4.8%. Moreover, considering employees, there is no statistically significant wage premium for workers in Northern Italy with respect to workers in the South. Instead, this is not the case for self employed, given that the interaction between South and the dummy self employed is negative and statistically significant (-16%). These findings contribute to highlighting the necessity for the Italian labour market to decentralise the current Italian System and to promote more local or firm wage bargaining. However, the decentralisation may present significant challenges, particularly during the transition period.