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Technology and Firm Size-Wage Differentials in Colombia, Mexico, and Taiwan (China)

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  • Tan, Hong
  • Batra, Geeta
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    Abstract

    In many economies, studies have found large wage differentials not accounted for by workforce characteristics, collective bargaining, or market power. Researchers attribute these differentials to either unobserved worker quality or pay incentives designed to elicit worker effort. This article finds empirical support for an alternative explanation: These wage differentials result from firms' technology-generating activities. Using firm-level data from Colombia, Mexico, and Taiwan (China), the article compares the effects of research and development, worker training, and exports by employers on the wages of skilled and unskilled workers. The results suggest that technology investments lead to large wage premiums for skilled workers but not for unskilled workers. These wage premiums are primarily the result of investments in research and development and in training, while exporting is relatively less important except in Colombia. Copyright 1997 by Oxford University Press.

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    Bibliographic Info

    Article provided by World Bank Group in its journal World Bank Economic Review.

    Volume (Year): 11 (1997)
    Issue (Month): 1 (January)
    Pages: 59-83

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    Handle: RePEc:oup:wbecrv:v:11:y:1997:i:1:p:59-83

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    Cited by:
    1. Eduardo Lora & Mauricio Olivera, 1998. "Macro Policy and Employment Problems in Latin America," Research Department Publications 4116, Inter-American Development Bank, Research Department.
    2. Tybout, James, 1998. "Manufacuring firms in developing countries - how well do they do, and why?," Policy Research Working Paper Series 1965, The World Bank.
    3. Akar, Gizem & Balkan, Binnur & Tumen, Semih, 2014. "Overview of Firm-Size and Gender Pay Gaps in Turkey: The Role of Informal Employment," MPRA Paper 53835, University Library of Munich, Germany.
    4. Lopez-Acevedo, Gladys, 2002. "Technology and skill demand in Mexico," Policy Research Working Paper Series 2779, The World Bank.
    5. Quibria, M. G., 1999. "Challenges to human resource development in Asia," Journal of Asian Economics, Elsevier, vol. 10(3), pages 431-444.
    6. Deolalikar, Anil & Hasan, Rana & Khan, Haider & Quibria, M.G., 1997. "Competiveness and Human Resource Development," MPRA Paper 2819, University Library of Munich, Germany, revised 1997.
    7. César P. Bouillon, 2000. "Returns to Education, Sector Premiums, and Male Wage Inequality in Mexico," IDB Publications 51038, Inter-American Development Bank.
    8. Even, William E. & Macpherson, David A., 2009. "Is Bigger Still Better? The Decline of the Wage Premium at Large Firms," IZA Discussion Papers 4082, Institute for the Study of Labor (IZA).
    9. Kanbur, Ravi & Lustig, Nora, 1999. "Why is Inequality Back on the Agenda?," Working Papers 127690, Cornell University, Department of Applied Economics and Management.
    10. César P. Bouillon, 2000. "Inequality and Mexico's Labor Market after Trade Reform," IDB Publications 53718, Inter-American Development Bank.
    11. World Bank, 2000. "Mexico : Earnings Inequality after Mexico's Economic and Educational Reforms, Volume 1. Main Document," World Bank Other Operational Studies 15263, The World Bank.
    12. Suryahadi, A. & Chen, P. & Tyers, R., 1999. "Openness, Technological Change and Labor Demand in Pre-Crisis Indonesia," ANU Working Papers in Economics and Econometrics 1999-377, Australian National University, College of Business and Economics, School of Economics.
    13. Sakellariou, Chris N. & Patrinos, Harry A., 2003. "Technology, computers, and wages : evidence from a developing economy," Policy Research Working Paper Series 3008, The World Bank.
    14. Strobl, Eric & Thornton, Robert, 2002. "Do Large Employers Pay More in Developing Countries? The Case of Five African Countries," IZA Discussion Papers 660, Institute for the Study of Labor (IZA).

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