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Decreasing Wage Inequality in Italy: The Role of Supply and Demand for Education

  • Paolo Naticchioni
  • Andrea Ricci


    (Univ. of Cassino, Univ. of Rome “La Sapienza”, CeLEG (LUISS-Rome) and ISFOL.)

In this paper we show that wage inequality decreased in the Italian private sector, both in the upper and in the lower tail of the distribution, in the period 1993-2006. By applying a quantile decomposition procedure we find that the decrease of the 90/50 ratio is almost totally related to a negative coefficients component. As for the reduction of the 50/10 ratio, the quantile decomposition shows that it can be related to both the negative coefficients component and the residual component. We claim that that supply-demand interactions have to be considered as the main explanation for the falling educational wage premia that represent the driving force of the falling 90/50 ratio. The reduction of the 50/10 ratio can be instead associated to the changes in the residual component -related to compositional effects-, to the changes in the occupation distribution and to changes in tax regimes.

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Paper provided by Dipartimento di Economia, Sapienza University of Rome in its series Working Papers - Dipartimento di Economia with number 9-DEISFOL.

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Length: 32 pages
Date of creation: 2009
Date of revision: 2009
Handle: RePEc:des:wpaper:15
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  1. John DiNardo & Nicole M. Fortin & Thomas Lemieux, 1995. "Labor Market Institutions and the Distribution of Wages, 1973-1992: A Semiparametric Approach," NBER Working Papers 5093, National Bureau of Economic Research, Inc.
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