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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

    (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 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.

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Paper provided by Dipartimento di Economia e Finanza, LUISS Guido Carli in its series Working Papers CELEG with number 1004.

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Date of creation: 2010
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Handle: RePEc:lui:celegw:1004
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  1. 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 1001-44, September.
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