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


  • Paolo Naticchioni

    (University of Cassino and CeLEG)

  • Andrea Ricci



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 and demand for education 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.

Suggested Citation

  • Paolo Naticchioni & Andrea Ricci, 2010. "Decreasing Wage Inequality in Italy: The Role of Supply and Demand for Education," Working Papers CELEG 1004, Dipartimento di Economia e Finanza, LUISS Guido Carli.
  • Handle: RePEc:lui:celegw:1004

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    References listed on IDEAS

    1. Alessia Matano & Paolo Naticchioni, 2010. "Trade and Wage Inequality: Local versus Global Comparative Advantages," The World Economy, Wiley Blackwell, vol. 33(12), pages 1757-1787, December.
    2. DiNardo, John & Fortin, Nicole M & Lemieux, Thomas, 1996. "Labor Market Institutions and the Distribution of Wages, 1973-1992: A Semiparametric Approach," Econometrica, Econometric Society, vol. 64(5), pages 1001-1044, September.
    3. Martins, Pedro S. & Pereira, Pedro T., 2004. "Does education reduce wage inequality? Quantile regression evidence from 16 countries," Labour Economics, Elsevier, vol. 11(3), pages 355-371, June.
    4. Lucifora, Claudio & Comi, Simona & Brunello, Giorgio, 2000. "The Returns to Education in Italy: A New Look at the Evidence," IZA Discussion Papers 130, Institute for the Study of Labor (IZA).
    5. Pamela Giustinelli, 2004. "Quantile Regression Evidence on Italian Education Returns," Rivista di Politica Economica, SIPI Spa, vol. 94(6), pages 49-100, November-.
    6. Lilla Marco, 2005. "Disuguaglianze salariali in Italia: nuove evidenze dai microdati SHIW," Politica economica, Società editrice il Mulino, issue 1, pages 71-102.
    7. Paolo Naticchioni & Andrea Ricci & Emiliano Rustichelli, 2010. "Far away from a skill-biased change: falling educational wage premia in Italy," Applied Economics, Taylor & Francis Journals, vol. 42(26), pages 3383-3400.
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    Cited by:

    1. Bosio, Giulio & Leonardi, Marco, 2011. "The Impact of Bologna Process on the Graduate Labour Market: Demand and Supply," IZA Discussion Papers 5789, Institute for the Study of Labor (IZA).

    More about this item


    Inequality; Educational Wage Premia; Quantile Decomposition; supply-demand of education; Italy.;

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights


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