Innovation, Wages, Profits, and Spillovers

Çiğdem Ekiz and Erol Taymaz
Department of Economics
Middle East Technical University
Ankara Turkey
http://users.metu.edu.tr/etaymaz

Dipartimento di Politica economica, UNICATT
Milan / 26 October 2022

Why innovation and wages?

Outline

Innovation and wages

Wage bargaining model

\(w = \theta lp + (1 - \theta) w^*\)

Innovation and wages

\(w = \theta lp + (1 - \theta) w^*\)

Innovation will lead to an increase in wages because of

Innovation and wages

Innovation may not have an equal effect on all workers.
Consider two types of labor, high-skill (H) and low-skill (L)

H get higher wages because they have

H will benefit more from innovation because innovation will increase

Innovation and profits

Labor productivity will increase

Innovation is likely to make income distribution unequal

Innovation, labor turnover and spillovers

Effect of innovation on wages

Effect of innovation on wages

Estimation method

Problems

Problems

Model

Model

\(te_t(s) = w_t(s) - w_t(∞), s = q, ..., T\)

\(\tau_{st} = E[te_t(s) | d_s = 1], s = q, ..., T; t = s, ..., T\)

Wooldridge method

Wooldridge method

Expected wage can be estimated by fixed-effects model

Data sources

Wages

The data set

Number of firms, 2020

Variables

Average firm size

Average firm size

Relative median wages

Intra-firm wage differentials

Estimation results

Effect of patents on wages

Effect of R&D on wages

Effect of patents on gender wage differentials

Effect of R&D on gender wage differentials

Effect of patents and R&D on productivity

Effect of patents and R&D on profits

Effect of patents and R&D on turnover

Results

Innovation leads to a long term, permanent, increase in


Policy implications

Limitations




Many thanks…