Do Satisfactory Working Conditions Contribute to Explaining Earning Differentials in Italy? A Panel Data Approach

The aim of the present paper is to analyse the wage differentials associated with non-pecuniary working conditions using objective and subjective data. In some situations a worker can be compensated for unsatisfactory working conditions via a higher wage; conversely, in the presence of segmented labor markets, higher wages can be associated with favorable non-monetary working conditions. Moreover, a positive correlation between wages and satisfactory working conditions exists when there is efficient union bargaining regarding both wages and working conditions. In the present study, we estimate a wage equation with variables that capture workers' subjective views regarding their current non-pecuniary working conditions, allowing for unobserved individual heterogeneity. Our results reveal a positive wage differential associated with satisfactory non-pecuniary working conditions. This result supports the segmentation labor market hypothesis. The focus of the study is on Italian workers, but we compare the core results the those obtained for other Mediterranean countries. Copyright 2007 The Author. Journal compilation CEIS, Fondazione Giacomo Brodolini and Blackwell Publishing Ltd. 2007.