Technological change and wages in China: Evidence from matched employer-employee data

The relationship between research and development (R D) intensity and wages is examined using a unique matched employer-employee dataset. The ordinary least squares estimates suggest that a one standard deviation increase in R D intensity is associated with an increase in the hourly wage rate between 3.4 and 6.9 for the full sample, depending on the exact specification. The instrumental variable estimates are that a one standard deviation increase in R D intensity is associated with an increase in the hourly wage rate between 5.5 and 11.4 . The wage elasticity with respect to R D intensity is found to be higher in larger firms as well as for better educated workers and workers with technical skills. Consistent with the rent-sharing hypothesis it is also found that the wage elasticity with respect to R D intensity is higher for workers who belong to the Communist Party or union.