# ICT Capital-Skill Complementarity and Wage Inequality: Evidence from OECD Countries

## TL;DR

This paper investigates how changes in ICT capital and labor quantities have contributed to wage inequality across OECD countries by estimating a sector-level production function with capital-skill complementarity.

## Contribution

It introduces an extended production function model to quantify the impact of ICT capital and skill-biased technological change on wage inequality across countries.

## Key findings

- ICT equipment, skilled, and unskilled labor significantly influence the skill premium.
- Most changes in wage inequality are linked to relative quantities of ICT and labor types.
- Results vary across sectors and countries, highlighting diverse effects.

## Abstract

Although wage inequality has evolved in advanced countries over recent decades, it remains unknown the extent to which changes in wage inequality and their differences across countries are attributable to specific capital and labor quantities. We examine this issue by estimating a sector-level production function extended to allow for capital-skill complementarity and factor-biased technological change using cross-country and cross-industry panel data. Our results indicate that most of the changes in the skill premium are attributable to the relative quantities of ICT equipment, skilled labor, and unskilled labor in the goods and service sectors of the majority of advanced countries.