BEJ

Using a large panel of Italian firms and building on previous work by Caselli et al. (2023), I estimate the employment-maximizing minimum wage in Italy in 2022 to be €13.85 per hour. This minimum wage level would feature highly heterogeneous impacts on local labor markets, with large disemployment effects in the South and little to no bite in the North. To address this spatial imbalance, I estimate region-specific optimal minimum wages for the same year, finding results ranging from €7.46 per hour in Sardinia to €18.73 per hour in the autonomous province of Bolzano. Introducing regional minimum wages in Italy reduces spatial heterogeneity in employment effects vis à vis the national minima, strengthening the link between idiosyncratic productivity and employment gains at the local (province) level. Additionally, I document a sizeable rise in firms’ monopsony power between 2019 and 2022, underpinned by labor productivity growing faster than average wages over the same period.

JEL classification: C33, J31, J38, J42, R58