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Establishment Level Earnings, Technology And The Growth Of Inequality: Evidence From Britain

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  • Lucy Chennells
  • John Van Reenen

Abstract

It is often argued that technical change is responsible for the increase in wage inequality in Britain and the United States in the 1980s and 1990s. In this paper we examine this argument using data from individuals and establishments. It is found that the presence of micro-electronic technologies in workplaces is associated with higher earnings, especially for skilled workers. Decompositions suggest that technical change could have been a cause of the increase in skills premium for highly skilled workers. Nevertheless, our view is that the correlation between wages and plant-level technology is mainly driven by the effect of high wages on the propensity to introduce new technologies rather than vice versa. This view is supported by simultaneous models of the wage-technology relationship.

Suggested Citation

  • Lucy Chennells & John Van Reenen, 1998. "Establishment Level Earnings, Technology And The Growth Of Inequality: Evidence From Britain," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 5(2-4), pages 139-164.
  • Handle: RePEc:taf:ecinnt:v:5:y:1998:i:2-4:p:139-164
    DOI: 10.1080/10438599800000003
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    References listed on IDEAS

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    1. David Card, 1992. "The Effect of Unions on the Distribution of Wages: Redistribution or Relabelling?," NBER Working Papers 4195, National Bureau of Economic Research, Inc.
    2. Machin, Steve & Van Reenen, John, 1996. "Technology and Changes in Skill Structure: Evidence from an International Panel of Industries," CEPR Discussion Papers 1434, C.E.P.R. Discussion Papers.
    3. Kevin T. Reilly, 1995. "Human Capital and Information: The Employer Size-Wage Effect," Journal of Human Resources, University of Wisconsin Press, vol. 30(1), pages 1-18.
    4. Jacob Mincer, 1991. "Human Capital, Technology, and the Wage Structure: What Do Time Series Show?," NBER Working Papers 3581, National Bureau of Economic Research, Inc.
    5. John E. DiNardo & Jörn-Steffen Pischke, 1997. "The Returns to Computer Use Revisited: Have Pencils Changed the Wage Structure Too?," The Quarterly Journal of Economics, Oxford University Press, vol. 112(1), pages 291-303.
    6. Richard B. Freeman, 1994. "Working Under Different Rules," NBER Books, National Bureau of Economic Research, Inc, number free94-1, October.
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    Citations

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    Cited by:

    1. Liu, Jin-Tan & Tsou, Meng-Wen & Hammitt, James K., 2004. "Computer use and wages: evidence from Taiwan," Economics Letters, Elsevier, vol. 82(1), pages 43-51, January.
    2. Mark Doms & Eric J. Bartelsman, 2000. "Understanding Productivity: Lessons from Longitudinal Microdata," Journal of Economic Literature, American Economic Association, vol. 38(3), pages 569-594, September.
    3. Paola Gritti & Riccardo Leoni, 2013. "The impact on wages of generic competencies, psychological capital, new work practices and digital technologies," Working Papers (2013-) 1301, University of Bergamo, Department of Management, Economics and Quantitative Methods.
    4. Schwiebacher, Franz, 2012. "Complementary assets, patent thickets and hold-up threats: Do transaction costs undermine investments in innovation?," ZEW Discussion Papers 12-015, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    5. Garcia, Angel & Jaumandreu, Jordi & Rodriguez, Cesar, 2004. "Innovation and jobs: evidence from manufacturing firms," MPRA Paper 1204, University Library of Munich, Germany.
    6. Brian P. Cozzarin, 2016. "Advanced technology, innovation, wages and productivity in the Canadian manufacturing sector," Applied Economics Letters, Taylor & Francis Journals, vol. 23(4), pages 243-249, March.
    7. Borghans, L. & ter Weel, B.J., 2000. "How Computerization changes the UK Labour Market: The Facts viewed from a new perspective," ROA Working Paper 7E, Maastricht University, Research Centre for Education and the Labour Market (ROA).

    More about this item

    Keywords

    Wages; technology; skill JEL Classification: J31;

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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