Cities as catalysts of wage inequalities from digitalisation

This paper studies the redistributive consequences of digitalisation, highlighting urbanisation economies as catalysts of wage inequalities. Digitalisation generates productivity and reinstatement effects, whose balance can vary across occupations and settlement type, increasing wage inequalities among occupational groups within regions. Occupation-specific ordinary least squares (OLS) regressions using cross-sectional data on Italian cities (NUTS3 regions) in the period 2012-2019 show low-skilled workers facing displacement and negative productivity effects, particularly in non-urban contexts. High-skilled workers in urban environments enjoy increased labour demand and wages. Consequently, urban areas experience sharper wage inequalities as digital technologies spread, concentrating wealth and amplifying disparities among occupational groups.