Economic complexity and the demand for low-skill service jobs : evidence from the Italian provinces

From 1980s, a process of radical transformation has changed labor markets in developed countries, both in terms of the nature of jobs and of the production process. The sophistication of products has led both to the creation and destruction of jobs, concentrating demand of workers at the opposite ends of occupational skill distribution. The economic complexity index (ECI) is a good measure of this structural change, capturing the knowledge intensity of a country. Because of the relevant heterogeneity at the local level, we investigate how polarization affects Italian provinces during the years after the Great Recession (2010-2018). We investigate to what extent local economic complexity (measured by the ECI) matters in the change of shares in low-skill service occupations. Our empirical analysis indicates that the ECI is a significant driver of the change in the share of low-skill service jobs as it is robust to all specifications: The more a province is able to produce sophisticated goods, the more it requires a larger share of high-skilled workers and, as a consequence, of low-skill service workers. To test the robustness of our results, we implemented an IV and a spatial model that have confirmed our results.