Skill upgrading and wage gap: a decomposition analysis for Italian manufacturing firms

2 PM  
Venue: DISA Seminar room, Department of Economics and Management 

Speaker:

• Chiara Tomasi - University of Trento

Abstract

The paper aims at investigating the evolution of the employment and wage structure of Italian manufacturing firms in the early 2000s. The work implements a decomposition analysis that breaks down the variation in the skilled wage bill ratio into employment and wage movements and further disentangles these movements into shifts between or within sectors, and within sector, between or within firms. We provide a methodological framework that consistently combines the industry-level analysis with the firm-level one and that contemporaneously takes into account changes in the skill intensity and in the wage gap. The results suggest that most of the changes are reported within firms where we observe a skill upgrading effect not followed by a price adjustment. The increase in the relative employment of skilled workers and the decrease in the wage gap between high- skilled and low-skilled workers can be attributed substantially to changes at exporters and importers and at more productive firms. Finally, the paper further accounts for changes in the hourly wage premium and skill intensity and it shows that the annual wage gap is pushed by a substantial fall in the hourly wage premium and by an increase in the numbers of hours worked by the skilled factor.