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Skill dispersion and firm productivity; an analysis with employer-employee matched data

  • Susanna Iranzo

    ()

    (University of Sidney)

  • Fabiano Schivardi

    ()

    (Bank of Italy, Economic Research Department)

  • Elisa Tosetti

    ()

    (Cambridge University)

We study the relation between workers� skill dispersion and firm productivity using a unique dataset of Italian manufacturing firms from the early eighties to the late nineties with individual records on all their workers. Our measure of skill is the individual worker�s effect obtained as a latent variable from a wage equation. Estimates of a generalized CES production function that depends on the skill composition show that a firm�s productivity is positively related to skill dispersion within occupational status groups (production and non-production workers) and negatively related to skill dispersion between these groups. Consistently, the variance decomposition shows that most of the overall skill dispersion is within and not between firms. We find no change over time in the share of each component, in contrast with some evidence from other countries, based on less comprehensive data.

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Paper provided by Bank of Italy, Economic Research and International Relations Area in its series Temi di discussione (Economic working papers) with number 577.

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Date of creation: Feb 2006
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Handle: RePEc:bdi:wptemi:td_577_06
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