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Innovation and within-firm wage inequalities: empirical evidence from major European countries

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  • Valeria Cirillo
  • Matteo Sostero
  • Federico Tamagni

Abstract

A large literature links wage inequality to technology, but it does not explicitly consider whether innovation contributes to shaping wage inequalities within firms. In this work we seek to fill this gap, exploiting a representative matched employer–employee survey on firms active in major European economies. We find that innovation tends to increase the wage-gap between high and low deciles of the within-firm wage distribution, while it reduces the wage-gap between wages of managers and low-layer employees. Moreover, firm size plays a crucial mediating role, as we find that large innovative firms are more egalitarian than their small counterparts, irrespective of the measure of within-firm wage inequality considered.

Suggested Citation

  • Valeria Cirillo & Matteo Sostero & Federico Tamagni, 2017. "Innovation and within-firm wage inequalities: empirical evidence from major European countries," Industry and Innovation, Taylor & Francis Journals, vol. 24(5), pages 468-491, July.
    • Handle: RePEc:taf:indinn:v:24:y:2017:i:5:p:468-491
    DOI: 10.1080/13662716.2017.1310035
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    Cited by:

    1. Domini, Giacomo & Grazzi, Marco & Moschella, Daniele & Treibich, Tania, 2022. "For whom the bell tolls: The firm-level effects of automation on wage and gender inequality," Research Policy, Elsevier, vol. 51(7).
    2. Cirera, Xavier & Martins-Neto, Antonio Soares, 2023. "Do innovative firms pay higher wages? Micro-level evidence from Brazil," Research Policy, Elsevier, vol. 52(1).
    3. Thanos Fragkandreas, 2022. "Three Decades of Research on Innovation and Inequality: Causal Scenarios, Explanatory Factors, and Suggestions," Working Papers 60, Birkbeck Centre for Innovation Management Research, revised Feb 2022.
    4. Kenta IKEUCHI & Kyoji FUKAO & Cristiano PERUGINI & Fabrizio POMPEI, 2023. "Which Employers Share Rents? A firm-level analysis for Japan," Discussion papers 23048, Research Institute of Economy, Trade and Industry (RIETI).
    5. Jaan Masso & Priit Vahter, 2023. "Innovation as a firm-level factor of the gender wage gap," International Journal of Manpower, Emerald Group Publishing Limited, vol. 45(3), pages 449-465, August.
    6. Huang, Ruting & Duan, Shanshan & Li, Xiyan, 2025. "Environmental regulation and intra-firm wage inequality: A skill premium perspective," Energy Economics, Elsevier, vol. 148(C).
    7. Ofori, Isaac K. & Veling, Louise & Cullen, John, 2026. "Frontier Technology Adoption and Inclusive Green Growth in the EU: A Double-edged Sword?," MPRA Paper 127772, University Library of Munich, Germany.
    8. Jaccoud, Florencia, 2025. "Robots & AI Exposure and Wage Inequality," MERIT Working Papers 2025-013, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    9. Marta F. Arroyabe & Martin Schumann, 2022. "On the Estimation of True State Dependence in the Persistence of Innovation," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 84(4), pages 850-893, August.

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