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CEP discussion paper
The Innovation Premium to Soft Skills in Low-Skilled Occupations
Philippe Aghion, Antonin Bergeaud, Richard Blundell and Rachel Griffith December 2019
Paper No' CEPDP1665:
Full Paper (pdf)

JEL Classification: O33; L23; J31

Tags: innovation; skill-based technological change; wage; complementarity

Matched employee-employer data from the UK are used to analyze the wage premium to working in an innovative firm. We find that firms that are more R&D intensive pay higher wages on average, and this is particularly true for workers in some low-skilled occupations. We propose a model in which a firm’s innovativeness is reflected in the degree of complementarity between workers in low-skill and high-skilled occupations, and in which non-verifiable soft skills are an important determinant of the wages of workers in low-skilled occupations. The model yields additional predictions on training, tenure and outsourcing which we also find support for in data.