Marta Fana (University of Parma)

The Transition is in the Details: Evidence on Firm Greenness and Wage Inequality from Portuguese Administrative Data

Abstract: The green transition is a defining policy and economic shift, exemplified by initiatives like the European Green Deal and the Inflation Reduction Act in the US. While substantial research has explored the impacts of the green transition on labour markets at broad, aggregate levels, there remain critical gaps in our understanding of firm-level dynamics, particularly regarding wage inequality within firms. This study addresses those gaps by introducing a novel measure of ‘firm greenness’ that accounts for a comprehensive set of green practices across 12 dimensions, including environmental regulation compliance, green technology adoption, and worker training in sustainable practices. Using detailed linked employer-employee administrative data and survey information from Portugal, we investigate the relationship between firm greenness and wages within firms. Our findings provide valuable insights into the role of firm-level green practices in shaping wage dynamics, highlighting the potential for increased wage inequality as firms adopt green practices. This research contributes to the literature on variouos streams of the economic literature by offering a refined methodology for measuring firm greenness and by pointing to the within-firm labour market impacts of the green transition.

joint work with Clemens Domnick and Francesco Rentocchini.