Labor demand and ICT adoption in Spain

Spain is delayed in adopting information and communication technologies (ICT) and its productivity per hour worked presents a downward trend since the mid-90s. In this paper we argue that these two facts are related. Using the EU KLEMS dataset we test the capital-skill complementarity hypothesis in a cross-section of sectors in Spain. We find that the substitutability between workers and ICT assets falls as worker skill level rises, and that this feature holds across all sectors. Furthermore, the ICT assets are complementary with skilled workers. The fraction of workers employed with medium and high skills across sectors rose by 21% and 12%, respectively, to the disadvantage of low skilled workers, due to an adjustment within sectors more than to a composition effect between sectors. Finally, using a regression analysis, we conclude that some labor market institutions are likely behind the evolution of sectorial productivity and ICT investment in Spain.