This paper explores the impact of the adoption of information and communications technology on firm performance and labor market outcomes using a firm survey from the manufacturing sector in Argentina. The findings are that at the firm level adoption of information and communications technology leads to increases in firm productivity and wages, and that the effects are heterogeneous across firms, being larger for initially high-productivity and high-skill firms. The increase in wages occurs even after controlling for skill composition, implying that there are productivity and rent-sharing mechanisms at play.Further findings show that adoption of information and communications technology is associated with employment turnover as captured by the replacement of workers, elimination of occupations, creation of new occupations, and decrease in the share of unskilled workers, supporting the view that ICT is complementary with skilled labor. At the same time, there is an increase in employment across all skill categories. This result is compatible with positive output effects that drive employment, and with job turnover within the unskilled group. JEL CODES: J24, J31In this paper we empirically study the effects of the adoption and use of information and communication technologies (ICT) at the firm level on productivity, wages and employment turnover in the Argentine manufacturing sector.The question of whether innovation affects productivity and labor outcomes has a long tradition that spans the literature of skilled biased technical change (Katz and Murphy, 1992), the more recent task-based approach of Autor, Levy, and Murnane (and Dorn (2013), among others. More closely related to digital technologies, Kruger (1993) finds a positive association between the use of computers and wages. More recent studies such as Autor, Levy, and Murnane (2003), Akerman et al (2015) and Michaels, Natraj, and VanReenen (2014), emphasize that impacts on wages and employment are different by worker or occupation type.Regarding productivity, ICT adoption is associated with higher productivity outcomes at the country, industry and firm level. In fact, investment in ICT is credited with the increase in labor productivity in the US during the second half of the 1990s and the increasing productivity gap between the US and the EU during that same period. See Draca, Sadun, and Van Reenen (2007) for a literature review of growth accounting and econometric estimation results. The effects of ICT adoption on productivity are found to be largely heterogeneous and to depend on organizational capital and management practices (Bresnahan et al., 2002, Caroli and Van Reenen, 2001, Bloom, Sadun and Van Reenen, 2012.Using a panel of Argentine manufacturing firms spanning the period 2010-2012 we provide further evidence on the nature of the links between adoption of ICT, productivity, and labor outcomes. We study the effect of ICT adoption on productivity and wages; we explore complementarities with predetermined firm characteristics; and we estimate chan...

In this paper, we develop a simple theoretical model that allows us to disentangle empirically the extent of imperfect competition in product and labor markets using plant-level production data. The model assumes profit-maximizing producers that face upward-sloping labor supply and downward-sloping product demand curves. We derive a reduced-form formula for the ratio between markdowns and markups based on DeLoecker and Warzynski (2012). We use production function estimation techniques to estimate output elasticities and construct a measure of combined market power. We separate product and labor market power by estimating firm-level labor supply elasticities instrumenting wages with intermediate inputs. Our results suggest that both markets exhibit imperfect competition, but variation across industries is driven by the ease of firms to set prices above marginal costs. On average, manufacturing plants charge prices 78% higher than marginal costs, and pay wages 11% less than marginal revenue productivity of labor. We find a negative correlation between product and labor market power and more elastic labor supply curves for unskilled workers. Moreover, we obtain a positive correlation between firms' product market power and productivity, size and exporter status, and a negative correlation of these measures with labor market power. In the last part, we estimate the relative gains of eliminating market power dispersion on allocative efficiency using the model by Hsieh and Klenow (2009). We find that market power dispersion in product markets is more important on TFP than labor markets, and that the negative correlation between the two measures of market power corrects in 7% the economic distortion derived from market power dispersion. Small sections of text, that are less than two paragraphs, may be quoted without explicit permission as long as this document is stated. Findings, interpretations and conclusions expressed in this publication are the sole responsibility of its author(s), and it cannot be, in any way, attributed to CAF, its Executive Directors or the countries they represent. CAF does not guarantee the accuracy of the data included in this publication and is not, in any way, responsible for any consequences resulting from its use. Small sections of text, that are less than two paragraphs, may be quoted without explicit permission as long as this document is stated. Findings, interpretations and conclusions expressed in this publication are the sole responsibility of its author(s), and it cannot be, in any way, attributed to CAF, its Executive Directors or the countries they represent. CAF does not guarantee the accuracy of the data included in this publication and is not, in any way, responsible for any consequences resulting from its use.

This study has been prepared within the UNU-WIDER project Detecting and countering illicit financial flows that is implemented in collaboration with the University of Copenhagen. The project is part of the Domestic Revenue Mobilization programme, which is financed through specific contributions by the Norwegian Agency for Development Cooperation (Norad).

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