Labour Market Power and the Quest for an Optimal Minimum Wage: Evidence from Italy

This study investigates the recent trends in labour market power in Italy and assesses the impact of a potential minimum wage using a large sample of manufacturing rms. We show that, despite an average shift of labour market power from the owners to the workers, monopsony power is still widespread, especially in some sectors and regions. The introduction of a minimum wage would be benecial to workers and the economy as it reduces the monopsony power of highly productive rms paying low wages; however, it may also have a negative impact, since rms with low wages and low labour productivity may react by reducing the number of their employees or even by exiting the market. Finally, we nd that an optimal minimum wage, which minimises the negative eect and maximises the positive eect for the economy, ranges between 8.25 and 9.65 euro per hour.