DP3202 Wage Premia and Skill Upgrading in Italy: Why Didn't the Hound Bark?

Author(s): Paolo Manasse , Luca Stanca , Alessandro Antonio Turrini

Publication Date: February 2002

Keyword(s): wage differentials , technological change , international trade

JEL(s): F12 , F16 , J31

Programme Areas: International Trade and Regional Economics

Link to this Page: www.cepr.org/pubs/dps/DP3202.asp

This Paper presents firm level evidence on the dynamics of non-manual wage premia and employment shares in Italian manufacturing during the nineties. We find that the relative stability of aggregate wage premia and employment shares hides offsetting disaggregate forces. First, while technical progress raises the relative demand for skilled labor within firms, demand changes associated with exports reduce the relative demand for skills. Second, within the class of non-manual workers, wage premia and employment shares of executives rise substantially, whereas those of clerks fall in a similar proportion. We also find that the export status of firms plays a key role in explaining labour market dynamics, as exporters account for most of both demand-related and technology-related shifts. Overall, our results for Italy question the general validity of the conventional view that emphasizes the role of labour market institutions, as opposed to trade and technology, in determining wage and employment dynamics in continental Europe.