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In this paper we study optimal choices of self-selection into politics and commitment once in office on the part of citizens with heterogeneous abilities and heterogeneous motivations. Politicians can moonlight, i.e., they can work in the market sector while appointed in parliament. Our theoretical framework shows that high-ability citizens may enter politics. Yet while high-ability non-motivated (market-fit) politicians are likely to shirk, high-ability motivated (public-fit) ones are more committed to parliamentary activity. We test our predictions by using a unique database of Italian parliamentarians for the period 1996-2006. We find evidence of advantageous selection of the market-fit and the public-fit politicians in that they both display a pre-election income greater than that of the Italian population. We also show that the commitment of the market-fit parliamentarians in terms of voting attendance is negatively affected by income opportunities, whilst this is not the case for the public-fit ones.

Abstract In this paper we make use of a matched employer‐employee database for Italy to look at the spatial distribution of wages. Using this rich database we aim to open up the black box of agglomeration economies exploiting the micro dimension of interaction among economic agents, both individuals and firms. We provide evidence that firm size and, especially, skills are sorted across space and account for a large portion of the spatial wage variation. Our data also support the assortative matching hypothesis, which we show not to be driven by co‐location of good workers and firms. Finally, we point out that assortative matching is negatively related to local market size.

A growing body of research has contributed to understanding the labor market and political effects of globalization. This paper explores an overlooked aspect of trade-induced adjustments in the labor market: the institutional aspect. We take advantage of the two-tier collective bargaining structure of the Italian labor market, whereby the first tier entails setting minimum wages at the contract level. Using an instrumental variable strategy and exploiting variations in contract-level exposure to trade, we find for the 1995-2003 period that, on average, the surge in imports decreased contractual minimum wages by 1.5%. This impact increases in the share of unskilled workers employed in the contract. This negative institutional effect contrasts with a nonsignificant effect of trade on total wages, with the latter becoming positive and large only for highly skilled workers.

A growing body of research has contributed to understanding the labor market and political effects of globalization. This paper explores an overlooked aspect of trade-induced adjustments in the labor market: the institutional aspect. We take advantage of the two-tier collective bargaining structure of the Italian labor market, whereby the first tier entails setting minimum wages at the contract level. Using an instrumental variable strategy and exploiting variations in contract-level exposure to trade, we find for the 1995-2003 period that on average, the surge in imports decreased contractual minimum wages by 1.5%. This impact increased with the increase in the share of unskilled workers employed in the contract. This negative institutional effect contrasts with a nonsignificant effect of trade on total wages, with the latter becoming positive and large only for highly skilled workers.