# **5.5 Mechanisms through which ICT use could affect skill-labor composition within the**

To dig into the mechanisms that could be generating these changes in the skill composition of the labor force within firms, we take advantage of a very detailed survey regarding ICT use in Mexico, the National Survey on ICT, which is designed by the National Council of Science and Technology (CONACYT) and conducted by the National Institute of Statistics and Geography (INEGI). In this case, we use the two last waves of the survey, which almost match with the Census periods as this survey was conducted during 2009 (with information from 2008) and 2013 (with information from 2012). Due to the random design of this survey, we were only able to match slightly more than 600 firms for which we have information in all the relevant variables out of the 6,210 included in ENTIC. It is important to note that due to the construction of this panel, these firms are mostly big firms from the manufacturing sector.

As our measures regarding ICT use are physical measures (share of labor that uses computers and the Internet) which do not provide information on how these technologies are used within the firm and thus linked to productivity, we constructed a set of variables that approximate the use of Enterprise Resource Planning (ERP) systems. Following Garicano and Rossi-Hansberg (2006), as information becomes more widely available across the organization through ERP systems it could be easier for medium-skilled workers, production or even unskilled workers to make more decisions, thus acquiring more sophistication.

We use a question from ENTIC that analyzes the efforts of the firms towards having a better software for human resources, accounting, purchases and payment to suppliers, invoicing, use of information within the firm, sales support, inventories control, which are regarded as administration activities, as well as for production activities (processes control and product design). For each of these activities, we construct a score in which firms that do not use software for these tasks obtain zero and the score increases when firms use more sophisticated or tailor-made software. These scores were normalized so that they range between 0 and 1.

Table 24 shows how the increase in ICT use measured as the change in the share of labor that uses computer is associated with a higher change in the score in terms of administration and production activities. As the results show, a 10 percentage-point increase in ICT use increases the score by around 0.10 for administration activities. Analyzing the activities that are more enhanced within the firm as a result of ICT adoption, in Table 25 we observe that invoicing, the relation with suppliers, sales and accounting are the ones more highly correlated with an increasing ICT use. Inventories and Human resources software are also becoming more sophisticated as a result of ICT adoption but at a much smaller rate. On the other hand, there are no effects in terms of payroll and information software. A similar analysis for production activities shows that the score in terms of processes and products design are increased equally as a result of 53