• elasticity of substitution
• income inequalities
• nested CES production function
• Indirect Inference

In this work, I analyse the raising of income inequalities arising from "new technological progress", which seems to establish a complementarity relation between physical capital and skilled employment, while the "smart portion" of the production sector seems to be in a substitutability relation with unskilled employment. In order to study capital-skill complementarity, I start from a deepen analysis of the CES production function developed by Arrow, Chenery, Minhas and Solow (1961), considering the more complex environment of the so-called "nested" CES production function. To estimate capital-skill complementarity, I propose a new methodology based on the Indirect Inference (Gouriéroux et al., 1993), which I validate with a Monte Carlo experiment. Finally, the work contains the results of the estimation of the nested CES production function for a set of benchmark countries. One of the results is that the usual theoretical framework developed in the literature is not able to capture income inequalities dynamics.