Information and Communication Technologiesand Skill Upgrading:The Role of Internal vs. External Labour Markets

Following the adoption of information and communication technologies (ICT), firms are likelyto face increasing skill requirements. They may react either by training or hiring the newskills, or by a combination of both. We first show that ICT are indeed skill biased and we thenassess the relative importance of external and internal labour market strategies. We showthat skill upgrading following ICT adoption takes place mostly through internal labour marketsadjustments. The introduction of ICT is associated with an upward shift in firms’ occupationalstructure, of which one third is due to hiring and firing workers from and to the external labourmarket, whereas two-thirds are due to promotions. Moreover, we find no compelling evidenceof external labour market strategies based on “excess turnover”. In contrast, French firmsheavily rely on training in order to upgrade the skill level of their workforce, even if this variesacross industries....