This paper examines the impact of technological innovation on wages using a panel of British firms. A head-count measure of major innovations between 1945 and 1983 is combined with share price and accounting information. Innovating firms are found to have higher average wages, but rival innovation tends to depress own wages. This appears consistent with a model where wages are partly determined by a sharing in the rents generated by innovation. In other words, innovation may be a good instrument for proxies for rents such as profitability, quasi rents, or Tobin's (average) Q. Instrumental variable estimates of the elasticity between wages and quasi rents are about 0.29.

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John Van Reenen

1 February 1996

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The Quarterly Journal of Economics 111(1) , pp.195-226, 1996

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DOI: 10.2307/2946662

https://www.jstor.org/stable/2946662

This Journal article is published under the centre's Labour markets programme, Growth programme.

This publication comes under the following theme: Labour market inequality