Labour market frictions across worker types

We analyze the patterns and evolution of labour market frictions in Italy over the period 2002–2019, distinguishing between white- and blue-collar workers. For both types of employees, we document a fall in the wedge between the marginal revenue product of labour (MRPL) and labour costs over the sample period. Such a decline hints to changes in the labour market that favour workers over firms. In the most recent years, the cost of blue-collar workers is about 10% above their MRPL, while white-collar workers’ are paid about 10% below their MRPL. We find significant heterogeneity across economic sectors and Italian regions, with higher labour wedges in the southern part of the country for both white- and blue-collar workers.