Ricerc@Sapienza

In this paper, we estimate the urban wage premia (UWP) in Italy, with its economy characterized
by the interplay between collective bargaining and spatial heterogeneity in the cost
of living. We implement a reduced-form regression analysis using both nominal and real (in
temporal and spatial terms) wages. Our dataset for the 2005-2015 period includes, for workers’
characteristics, unique administrative data provided by Italian Social Security Institute and, for
the local CPI computation, housing prices collected by Italian Revenue Agency. For employees
covered by collective bargaining, we find a zero UWP in nominal terms and a negative
and non-negligible UWP in real terms (-5%). To capture the role played by centralized wage
settings, we also consider various groups of self-employed workers, who are not covered by
national labour agreements, while living in the same locations and enjoying the same amenities
as employees. We find that the UWP for self-employed workers are up to 25 times greater
than for employees. Moreover, sorting proves more notable in the case of self-employed workers,
i.e. the larger UWP provide the higher incentives for high-skilled individuals and better
firms to locate in cities. Our findings are confirmed on extending the analysis along the wage
distribution.