Individual Earnings, International Outsourcing and Technological Change: Evidence from Italy

Abstract

The aim of this paper is to empirically evaluate the relative effects of international outsourcing of materials and services and of ICT capital deepening on wage inequality between blue and white collars in the Italian manufacturing industry during the period 1985-1999. We merge an administrative data set on workers' wages and individual characteristics with data on imported inputs from Italian input-output tables and other sector-level variables. Our results confirm that both material and service outsourcing widen the skilled/unskilled wage gap while ICT capital deepening positively affects real wages regardless of the worker's status. However, important differences emerge when the overall sample is split between traditional and innovative sectors.

Keywords: International Outsourcing, ICT, Inequality, Wage

JEL Classification: F16, J31, C23, O3