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The Creation and Capture of Rents: Wages and Innovation in a Panel of UK Companies

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Van Reenen, John

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Abstract

This paper examines the impact of technological innovation on wages using a panel of UK manufacturing firms. We utilize a headcount measure of major innovations between 1945-83 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 q. Instrumental variable estimates of the elasticity between wages and quasi-rents are about 0.3, remarkably close to the recent findings of Abowd and Lemieux (1993).

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 1071.

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Date of creation: Nov 1994
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Handle: RePEc:cpr:ceprdp:1071

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Keywords: Innovation Rent-Sharing Wages

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Find related papers by JEL classification:
J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
O33 - Economic Development, Technological Change, and Growth - - Technological Change - - - Technological Change: Choices and Consequences; Diffusion Processes

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