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

This paper presents rm-level evidence on the dynamics of the rel-ative demand for non-manual workers in Italian manufacturing dur-ing the 1990s. The analysis provides a number of interesting results. First, the rise within rms in the share of non manual workers in both employment and hours worked (within-rm skill upgrading) is the main determinant of the increase in the relative demand for skilled workers. By contrast, demand changes associated to trade have mit-igated such a rise by shifting employment away from skill-intensive rms. Second, while the relative number of hours worked by skilled workers within rms has risen, the hourly wage premium has fallen. Third, within-rm skill upgrading is strongly and signicantly related to investment in computers and R&D. Fourth, we nd 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 than hourly relative We thank ISTAT for kindly providing the data for this study. We are indebted t