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...

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Main Authors: Cirera, Xavier, Soares Martins-Neto, Antonio
Format: Working Paper
Language:English
Published: World Bank, Washington, DC 2020
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
id okr-10986-34650
recordtype oai_dc
spelling okr-10986-346502022-09-20T00:11:10Z Do Innovative Firms Pay Higher Wages? Micro-Level Evidence from Brazil Cirera, Xavier Soares Martins-Neto, Antonio WAGE PREMIUM INNOVATION LABOR PRODUCTIVITY LABOR SKILLS FIRM SIZE 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. 2020-10-22T17:31:55Z 2020-10-22T17:31:55Z 2020-10 Working Paper http://documents.worldbank.org/curated/en/980071603123007836/Do-Innovative-Firms-Pay-Higher-Wages-Micro-Level-Evidence-from-Brazil http://hdl.handle.net/10986/34650 English Policy Research Working Paper;No. 9442 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo World Bank World Bank, Washington, DC Publications & Research Publications & Research :: Policy Research Working Paper Latin America & Caribbean Brazil
repository_type Digital Repository
institution_category Foreign Institution
institution Digital Repositories
building World Bank Open Knowledge Repository
collection World Bank
language English
topic WAGE PREMIUM
INNOVATION
LABOR PRODUCTIVITY
LABOR SKILLS
FIRM SIZE
spellingShingle WAGE PREMIUM
INNOVATION
LABOR PRODUCTIVITY
LABOR SKILLS
FIRM SIZE
Cirera, Xavier
Soares Martins-Neto, Antonio
Do Innovative Firms Pay Higher Wages? Micro-Level Evidence from Brazil
geographic_facet Latin America & Caribbean
Brazil
relation Policy Research Working Paper;No. 9442
description 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.
format Working Paper
author Cirera, Xavier
Soares Martins-Neto, Antonio
author_facet Cirera, Xavier
Soares Martins-Neto, Antonio
author_sort Cirera, Xavier
title Do Innovative Firms Pay Higher Wages? Micro-Level Evidence from Brazil
title_short Do Innovative Firms Pay Higher Wages? Micro-Level Evidence from Brazil
title_full Do Innovative Firms Pay Higher Wages? Micro-Level Evidence from Brazil
title_fullStr Do Innovative Firms Pay Higher Wages? Micro-Level Evidence from Brazil
title_full_unstemmed Do Innovative Firms Pay Higher Wages? Micro-Level Evidence from Brazil
title_sort do innovative firms pay higher wages? micro-level evidence from brazil
publisher World Bank, Washington, DC
publishDate 2020
url http://documents.worldbank.org/curated/en/980071603123007836/Do-Innovative-Firms-Pay-Higher-Wages-Micro-Level-Evidence-from-Brazil
http://hdl.handle.net/10986/34650
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