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The Creation and Capture of Rents: Wages and Innovation in a Panel of U.K. Companies

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  • Van Reenen, John

Abstract

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. Copyright 1996, the President and Fellows of Harvard College and the Massachusetts Institute of Technology.

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Bibliographic Info

Article provided by MIT Press in its journal Quarterly Journal of Economics.

Volume (Year): 111 (1996)
Issue (Month): 1 (February)
Pages: 195-226

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Handle: RePEc:tpr:qjecon:v:111:y:1996:i:1:p:195-226

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