Innovation as a Firm-Level Factor of the Gender Wage Gap

Abstract

Although much research has investigated how innovation affects wages and wage inequality in general, less is still known on how innovation in firms affects the gender wage gap. We show, using matched employer-employee data from Estonia, that technological (product and process) and non-technological (organizational and marketing) innovation, as well as the firm's own R&D and innovation-related collaboration with external partners are, on average, associated with a larger gender wage gap in the firm. The positive effect of innovation on wages is about 3-5 percentage points smaller for women compared to men. The relationship between innovation and gender wage gap is stronger in the case of managers and plant and machine operators; therefore, both at the higher and lower end of the wage distribution, potentially indicating the importance of routine-biased technological change. We further show based on propensity score matching that men gain more from taking up a job at an innovative firm than women. The effect of innovation on men's wages and on the gender wage gap is significantly larger among newly hired employees compared to incumbent employees. Among the newly hired employees at innovative firms, taking up a job at a more 'open' innovator appears to be associated with especially strong gains for newly hired women. However, even in this case the gains fall short of the gains for men.