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Innovation and Inequality: The Role of Firms

Paper Session

Saturday, Jan. 5, 2019 2:30 PM - 4:30 PM

Atlanta Marriott Marquis, M304
Hosted By: American Economic Association
  • Chair: Nicholas Bloom, Stanford University

The Innovation Premium to Soft Skills in low-skilled occupations

Philippe Aghion
,
College of France and London School of Economics
Antonin Bergeaud
,
Paris School of Economics and PSL University (EHESS)
Richard Blundell
,
University College London
Rachel Griffith
,
University of Manchaster

Abstract

This paper uses matched employee-employer data from the UK that we augment with information on R&D expenditures, to analyze the relationship between innovativeness and average wage income across firms. We first show that more R&D intensive firms pay higher wages on average. Our second finding is that the premium to working in more R&D intensive firms seems to be higher for low-skilled workers than for high-skilled workers. As technology advances, demand for high skilled workers increases and they do better overall, but low skilled workers in innovative firms do better than other low-skilled workers. To account for these findings, we develop a simple model of the firm where the complementarity between high-skill occupation and low-skill occupation employees within the firm increases with the firm’s degree of innovativeness. An additional prediction of the model, which is also confirmed by the empirical analysis, is that low-occupation workers stay longer in more innovative firms.

Skill-Biased Innovation Activities: Evidence from Hungarian Firms

Attila Lindner
,
University College London
Balazs Murakozy
,
CERS-HAS
Balazs Reizer
,
CERS-HAS

Abstract

This paper investigates the consequences of innovation activities. We exploit a unique firm-level survey linked to employee data from Hungary that allows us to examine broadly defined innovation activities including the introduction of new products, process innovation and organizational innovation. We show that these innovation activities are skill-biased insofar as they lead to an increase both in the share of college educated workers and in their wage premium. The skill bias is not solely driven by high-novelty, R&D-based innovation, but also, to a comparable extent, by the low-novelty kind. Among low-novelty innovation types, product and process innovation are the most skill-biased, while organizational innovation is less so. These results highlight that low-novelty innovations contribute substantially to wage inequality.

Technology-Skill Complementarity in a Globalized World

Esther Ann Bøler
,
Imperial College

Abstract

This paper investigates skill-biased technical change at the firm level using rich Norwegian data. In the theoretical framework, firms invest in R&D to enhance their productivity which has a factor-neutral and a skill-biased component. Firms investing in R&D are found to have higher levels and growth rates of skillbiased productivity. The estimated growth rate of skill-biased productivity is sizable enough to account for the majority of the observed increase in the skill premium in Norway over the sample period. The results are supported by exploiting a policy change to estimate the causal effect of innovation on relative skill demand.
Discussant(s)
Nicholas Bloom
,
Stanford University
Attila Lindner
,
University College London
Aureo de Paula
,
University College London
JEL Classifications
  • J0 - General
  • O0 - General