Information technology and the value of skills: A systematically varying parameter model applied to 64 European regions

Bas ter Weel, MERIT, Maastricht, the Netherlands

This paper analyzes whether the diffusion of information technology can be associated with a shift in the value of
skills, using skill scores from the 1999 Higher Education and Graduate Employment in Europe Survey and IT use by
region. We develop a GLS estimator for random coefficient models to deal with unbalanced panels and a mixture of
fixed parameters and parameters systematically varying between regions to investigate whether or not the
coefficients of the skill scores in the wage function depend on the degree of computerization in a region. We find
that the relationship between IT and the value of skills is not straightforward, but that IT decreases the
marginal returns for skills such as cooperation and team working and that it increases the market value of
analytical skills.

Date: 06 May-00 0000