Collective bargaining and regional wage differences in Spain: an empirical analysis

Abstract

This article analyses the importance of labour market institutions and, in particular, collective wage bargaining in shaping regional wage differences in the Spanish labour market. Using microdata from the Spanish Structure of Earnings Survey, our results reveal that there are significant inter-regional wage differences for similarly skilled workers. These differences are present throughout the whole wage structure and can be explained by both competitive and non-competitive factors, such as an insufficient competition in product markets. In this context, industry-level collective bargaining plays a major role in accounting for regional wage differences, a role that in the Spanish case is enhanced due to its unusual regional dimension.