Do satisfactory working conditions contribute to explain earning differentials in Italy? A panel data approach

The aim of this paper is to analyze the wage differentials associated with non-pecuniary working conditions (distance to job, environment conditions, working times) using objective and subjective data. In fact, the individual can be compensated for unsatisfactory working conditions by higher wage (compensating wage differentials theories). Or, if productivity is positively associated with satisfaction, higher wages can be offered to more productive workers, that are workers with higher level of satisfaction (wage efficiency theories). Therefore, we estimate a wage equation with variables that capture workers’ subjective view about their current working conditions allowing for unobserved individual heterogeneity. Finally, we quantify any systematic differences in the wage differentials associated with nonpecuniary working conditions by occupation in order to infer whether any apparent productivity effects of flextime may be relatively greater than the hedonic effects for certain occupations.