Do Innovative Firms Pay Higher Wages? Micro-Level Evidence from Brazil
Several studies have documented a positive and causal relationship product or process innovation -- and labor productivity. Given the links between labor productivity and wages, a likely implication of this positive relationship is that innovation...
| Main Authors: | , |
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| Format: | Working Paper |
| Language: | English |
| Published: |
World Bank, Washington, DC
2020
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/980071603123007836/Do-Innovative-Firms-Pay-Higher-Wages-Micro-Level-Evidence-from-Brazil http://hdl.handle.net/10986/34650 |
| Summary: | Several studies have documented a
positive and causal relationship product or process
innovation -- and labor productivity. Given the links
between labor productivity and wages, a likely implication
of this positive relationship is that innovation is
associated with higher wages of more productive firms. This
paper explores the relationship between innovation and wages
using Brazil's employer-employee census and a novel
measure of innovation derived from the share of technical
and scientific occupations of workers in the firm. The
results show a robust and positive wage premium associated
with innovative firms. The decomposition of this
innovation-related wage premium suggests a series of
important stylized facts: (i) the innovation wage premium is
larger for manufacturing but also positive and significant
for agriculture and services; (ii) it is larger for large
firms, but also positive and significant for all firm size
categories including micro firms; and (iii) it is larger for
medium- and low-skill occupations, although this depends on
the use of firm fixed effects. More importantly, the paper
explores the causality between innovation and wages and
finds empirical support for the ideas that
“self-selection”—firms that innovate already pay higher
wages before becoming innovators -- and increases in wages
associated with starting innovation activity, which are
persistent for three years after firms start innovating. |
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