Working on the Train? The Role of Technical Progress and Trade in Explaining Wage Differentials in Italian Firms

IGIER Working Paper No. 242

34 Pages Posted: 13 Oct 2003

See all articles by Paolo Manasse

Paolo Manasse

Università degli Studi di Bologna - Department of Economics; IGIER, Bocconi University; International Monetary Fund (IMF) - Fiscal Affairs Department

Luca Stanca

University of Milan, Bicocca - Department of Economics; Università degli Studi di Milano-Bicocca - Center for Interdisciplinary Studies in Economics, Psychology & Social Sciences (CISEPS); Università degli Studi di Milano-Bicocca - Department of Economics, Management and Statistics (DEMS)

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Date Written: June 2003

Abstract

This paper presents firm-level evidence on the dynamics of the relative demand for non-manual workers in Italian manufacturing during the 1990s. The analysis provides a number of interesting results. First, the rise within firms in the share of non manual workers in both employment and hours worked (within-firm skill upgrading) is the main determinant of the increase in the relative demand for skilled workers. By contrast, demand changes associated to trade have mitigated such a rise by shifting employment away from skill-intensive firms. Second, while the relative number of hours worked by skilled workers within firms has risen, the hourly wage premium has fallen. Third, within-firm skill upgrading is strongly and significantly related to investment in computers and R&D. Fourth, we find that technical progress has raised the relative productivity of skilled workers (the skill-bias of technical progress is positive). Finally we show that the standard approach that measures annual, rather then hourly relative wages, produces a downward bias in the estimate of the skill-bias of technical progress.

Keywords: wage differentials, skill bias, technical progress, globalization

JEL Classification: F1, F16, J31, O3

Suggested Citation

Manasse, Paolo and Stanca, Luca, Working on the Train? The Role of Technical Progress and Trade in Explaining Wage Differentials in Italian Firms (June 2003). IGIER Working Paper No. 242. Available at SSRN: https://ssrn.com/abstract=438420 or http://dx.doi.org/10.2139/ssrn.438420

Paolo Manasse (Contact Author)

Università degli Studi di Bologna - Department of Economics ( email )

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I-40125 Bologna
Italy
+39 05 1209 2613 (Phone)

IGIER, Bocconi University

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+39 02 5836 3326 (Phone)

International Monetary Fund (IMF) - Fiscal Affairs Department ( email )

700 19th Street, NW
Washington, DC 20431
United States

Luca Stanca

University of Milan, Bicocca - Department of Economics ( email )

Piazza dell'Ateneo, Nuovo I
Milan 20126
Italy

Università degli Studi di Milano-Bicocca - Center for Interdisciplinary Studies in Economics, Psychology & Social Sciences (CISEPS) ( email )

Piazza dell'Ateneo Nuovo, 1
Milano, 20126
Italy

Università degli Studi di Milano-Bicocca - Department of Economics, Management and Statistics (DEMS) ( email )

Piazza dell'Ateneo Nuovo, 1
Milan, 20126
Italy

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