Working Paper

Product cycles, innovation and relative wages in European countries

Abstract: This paper attempts to bridge the gap between the theoretical literature examining how innovation affects income across countries and the empirical literature examining how relative wages within a country change over time. We test the hypothesis that the relative wage between workers in high-and low-technology industries within a country is a function of the rate of domestic innovation and innovation abroad. To test this hypothesis data for 7 European countries for the years 1971-1988 are used. The empirical results show that the relative rates of innovation (as measured by the ratio of patents to high-tech workers) are significant determinants of the relative wage.

Keywords: Wages; European Economic Community;

Status: Published in Journal of International Economics, February 1999 under title "Does Foreign Innovation Affect Domestic Wage Inequality?"

Bibliographic Information

Provider: Federal Reserve Bank of St. Louis

Part of Series: Working Papers

Publication Date: 1994

Number: 1994-022