Returns to ICT Skills

IEB Working Paper N. 2016/05

78 Pages Posted: 9 Mar 2016

See all articles by Oliver Falck

Oliver Falck

CESifo (Center for Economic Studies and Ifo Institute) - Department Human Capital and Innovation

Alexandra Heimisch

CESifo (Center for Economic Studies and Ifo Institute) - Ifo Institute

Simon Wiederhold

CESifo (Center for Economic Studies and Ifo Institute); Chair of Macroeconomics

Multiple version iconThere are 2 versions of this paper

Date Written: February 25, 2016

Abstract

How important is mastering information and communication technologies (ICT) in modern labor markets? We present the first evidence on this question, drawing on unique data that provide internationally comparable information on ICT skills in 19 countries. Our identification strategy relies on the idea that Internet access is important in the formation of ICT skills, and we implement instrumental-variable models that leverage exogenous variation in Internet availability across countries and across German municipalities. ICT skills are substantially rewarded in the labor market: returns are at 8 percent for a one-standard-deviation increase in ICT skills in the international analysis and are almost twice as large in Germany. Placebo estimations show that exogenous Internet availability cannot explain numeracy or literacy skills, suggesting that our identifying variation is independent of a person’s general ability. Our results further suggest that the proliferation of computers complements workers in executing abstract tasks that require ICT skills.

Keywords: ICT skills, broadband, earnings, international comparisons

JEL Classification: J31, L96, K23

Suggested Citation

Falck, Oliver and Heimisch, Alexandra and Wiederhold, Simon and Wiederhold, Simon, Returns to ICT Skills (February 25, 2016). IEB Working Paper N. 2016/05, Available at SSRN: https://ssrn.com/abstract=2744714 or http://dx.doi.org/10.2139/ssrn.2744714

Oliver Falck

CESifo (Center for Economic Studies and Ifo Institute) - Department Human Capital and Innovation ( email )

Poschingerstr. 5
Munich, 81679
Germany

Alexandra Heimisch (Contact Author)

CESifo (Center for Economic Studies and Ifo Institute) - Ifo Institute ( email )

Poschinger Str. 5
Munich, 01069
Germany

Simon Wiederhold

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

Chair of Macroeconomics

Auf der Schanz 49
Ingolstadt, 85049
Germany

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