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

Research Program on Labour Market Dynamics, 2009

32 Pages Posted: 5 Feb 2010

See all articles by Paolo Naticchioni

Paolo Naticchioni

University of Rome I; University of Cassino

Andrea Ricci

University of Perugia; ISFOL

Date Written: February 5, 2010


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.

Keywords: Inequality, Educational Wage Premia, Quantile Decomposition, supply-demand of education, Italy

JEL Classification: J24, J3, O3

Suggested Citation

Naticchioni, Paolo and Ricci, Andrea, Decreasing Wage Inequality in Italy: The Role of Supply and Demand for Education (February 5, 2010). Research Program on Labour Market Dynamics, 2009, Available at SSRN: or

Paolo Naticchioni (Contact Author)

University of Rome I ( email )

Piazzale Aldo Moro 5
Roma, Rome 00185

University of Cassino ( email )


Andrea Ricci

University of Perugia

Via Pascoli 22
Perigoa, 06121



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