Wage dispersion in Italy: An exploration based on linked employer-employee data

This article analyzes wage dispersion in a sample of Italian firms, by taking advantage of a unique Linked Employer-Employee dataset (LEED) merging four data sources from the National Institute of Statistics. An in-depth descriptive analysis conveys that knowledge-intensive services record the highest within- and between-firms wage dispersion in the sample. Regression-based results show that innovation does not drive up inequality in large companies. However, it can contribute to enlarge the within-firm wage dispersion as well as the wage gap across small firms. Overall, we argue that institutional factors should be called upon to explain the dramatic increase in wage disparities in the Italian economy.