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IZA
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Wage Differentials and International Trade in Italy Using Individual Micro Data 1991-1996
by
Anna M. Falzoni, Alessandra Venturini, Claudia Villosio
(July 2004)
published as 'Skilled and unskilled wage dynamics in Italy in the 1990s: changes in individual characteristics, institutions, trade and technology' in: International Review of Applied Economics, 2011, 25 (4), 441 – 463,
Abstract:
In this paper we use individual micro data on workers combined with industry and regional
data to study the dynamics of the wage differential between skilled and unskilled workers in
Italy in the period 1991-1996. Being different to previous empirical studies, our data allow us
to explore in a unique framework, the role of all the factors indicated in the literature as
possible causes of the widening of the wage gap between skilled and unskilled workers:
changes in the individual characteristics of workers, changes in the institutions of the labour
market, in skill-biased technological progress and increasing international integration.
Our results show that individual, firm and macro variables matter in explaining wage
differentials. In particular, international integration, both in terms of trade in goods and in
terms of international labour mobility, plays a role in determining the wage differential
between skilled and unskilled workers, but the impact is in opposite directions. While, on the
one hand, increasing trade in goods reduces wage differentials (through a positive impact on
the wages of the unskilled workers), on the other hand immigration increases wage
differentials, affecting the wage of the unskilled. As for the role of trade in goods, it is
interesting to note that export growth has a positive impact on the wages of the blue collar
workers and has no effect on the wages of the white collars, supporting the idea that Italy is
atypical with respect to other industrialised countries and has a comparative advantage in
low-skilled labour-intensive production. We have also shown that an analysis of the wage
differentials hides their different effects on the white and blue collar wage dynamics of the
explicative variables.
Text: See Discussion Paper No. 1204
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