In many European countries, wages are determined by collective bargaining agreements intended to improve wages and reduce inequality. We study the local and aggregate effects of collective bargaining in Italy and Germany. The two countries have similar geographical differences in firm...

During the 1970s, Italy experienced an extreme compression of wage differentials, similar to the better-known situation in Sweden. Most evidence suggests that this compression came to a stop around 1982-83, coincident with a major institutional change (in the form of the escalator clause in...

Italy and Germany have similar geographical differences in productivity - North more productive than South in Italy; West more productive than East in Germany - but have adopted different models of wage bargaining. Italy sets wages based on nationwide contracts that allow for limited local wage...