ISIGrowth Working Paper awarded by Progressive Economy

The ISIGrowth Working Paper “The dynamics of profits and wages: technology, offshoring and demand” has been awarded as winner of the call for papers ‘The Labour Market and the digital and technological revolution’ by the Progressive Economy scientific board. The Working Paper has been released by ISIGrowth researchers Dario Guarascio and Valeria Cirillo, together with Francesco Bogliacino (University of Bogota).

The Working Paper explores the impact of innovation, offshoring and demand on profits and wage dynamics. The growing relevance of functional distribution emerges as a key element for understanding recent increases in inequality.

The main results of the study can be summed up in three points. First, it highlights the contrasting effects of R&D and offshoring as wage determinants—the former exerts a positive effect while the latter exert a negative effect. Second, it shows that external demand is a key variable driving profits growth. Third, it provides evidence of noteworthy results stemming from the categorization of workers according to skill level, such as: high-skilled workers are favored by both innovation and offshoring, offshoring exerts downward pressure primarily on low-skilled wages and profits are positively correlated with high-skill wages, negatively correlated with medium-skill wages and not correlated with low-skill wages.

The WP has been presented on the 31st of May in the European Parliament and its policy implications discussed with experts and policy makers.