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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 analyses the links between wage inequality and technology, without explicitly taking into account within-firm wage dispersion. In this work we seek to fill this gap, exploiting a matched employeremployee dataset from a large representative survey on firms active in major European economies, providing several contributions. First, we employ different measures of within-firm wage dispersion, also accounting for wage differentials across managers vis-a-vis lower-layers occupations. Second, we disentangle the effects of innovation on wage dispersion within small vs. larger firms. Finally, we compare the effect of innovation across the spectrum between egalitarian and more unequal firms by means of quantile regressions. Our findings, robust to controlling for endogeneity and observed firm and workforce characteristics, suggest a good deal of heterogeneity. Indeed, innovation effects do vary according to the different measures of wage inequality, and also across smaller and larger innovative firms.

Suggested Citation

  • Valeria Cirillo & Matteo Sostero & Federico Tamagni, 2016. "Innovation and within-firm wage inequalities: empirical evidence from major European countries," LEM Papers Series 2016/05, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    • Handle: RePEc:ssa:lemwps:2016/05
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    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. IKEUCHI Kenta & FUKAO Kyoji & 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, 2020. "Innovation As A Firm-Level Factor Of The Gender Wage Gap," University of Tartu - Faculty of Economics and Business Administration Working Paper Series 128, Faculty of Economics and Business Administration, University of Tartu (Estonia).
    6. 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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    Keywords

    within-firm wage inequalities; innovation; occupational wage-gap; quantile regressions; employer-employee matched data;
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