Wage Setting Institutions and Internal Migration: The Effect of Regional Wage Equalization in Italy After 1969

Abstract Do minimum wages create spatial mismatches in local labour markets by affecting migration decisions? National wage floors are often motivated by fairness, but ignoring regional productivity differentials can negatively alter incentives to migration. This paper addresses these concerns by studying a reform that, in 1969–1972 Italy, equalized nominal values of sectoral minimum wages across the national territory. Using an original dataset of migration flows and labour market variables for 1962–1981, the paper shows that the reform was associated with a drop in internal migration and with the inception of spatial mismatches that characterize Italy’s labour markets to this day.