Technological Change and Wages in China: Evidence From Matched Employer-Employee Data

We examine the relationship between research and development (R&D) intensity and wages, using a unique matched employer-employee dataset. The dataset has the advantage that it links firm-level investment in R&D to individual employee wages and allows us to control for both employee and employer characteristics. Our main finding is that a one standard deviation increase in R&D intensity is associated with an increase in the hourly wage rate between 3.4 per cent and 6.9 per cent for the full sample, depending on the exact specification. We find that the wage elasticity with respect to R&D intensity is higher in larger firms as well as for better educated workers and workers with technical certification/skills. We also find, consistent with the rent-sharing hypothesis, that the wage elasticity with respect to R&D intensity is higher for workers who belong to the Communist Party or trade union.