New Imported Inputs, Wages and Worker Mobility

We provide a comprehensive assessment of the effects of new imported inputs on wage dynamics, on the skill-composition of the labor force, on worker mobility, and on the efficiency of matching between firms and workers. We employ matched employer-employee data for Italy, over 1995-2007. We complement these data with information on the arrival of new imported inputs at the industry level. We find new imported inputs to have a positive effect on average wage growth at the firm level. This effect is driven by two factors: (1) an increase in the white-collar/blue-collar ratio; and (2) an increase in the average wage growth of blue-collar workers, while the wage growth of white collars is not significantly affected. The individual-level analysis reveals that the increase in the average wage of blue collars is driven by the displacement of the lowest paid workers, while continuously employed individuals are not affected. We estimate the unobserved skills of workers following Abowd et al. (1999). We find evidence that new imported inputs lead to a positive selection of higher-skilled workers, and to an improvement in positive assortative matching between firms and workers.