Returns To ITC Skills

Abstract

How important is mastering information and communication technologies (ICT) in modern labour markets? The authors present the first evidence on this question, drawing on unique data that provide internationally comparable information on ICT skills in 19 countries from the OECD Programme for the International Assessment of Adult Competencies (PIAAC). The identification strategy relies on the idea that Internet access is important in the formation of ICT skills, and the researchers implement instrumental-variable models that leverage exogenous variation in Internet availability across countries and across German municipalities. ICT skills are substantially rewarded in the labour market: returns are at 8% for a onestandard- 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. The results further suggest that the proliferation of computers complements workers in executing abstract tasks that require ICT skills.