Lucy Chennells

Technical Change and Earnings in British Establishments

Recent empirical studies point to higher wages enjoyed by workers in environments where new technologies are intensively used. An examination of the 1984 and 1990 establishment-based WIRS reveals similar patterns. This paper argues that endogeneity bias is endemic in these results. Controlling for this endogeneity bias suggests that the estimated impact of new technologies on wages is seriously upward-biased. It is more likely that the earnings-technology correlation is driven by the impact of higher earnings on technical change rather than vice versa. Copyright 1997 by The London School of Economics and Political Science

Establishment Level Earnings, Technology And The Growth Of Inequality: Evidence From Britain

It is often argued that technical change is responsible for the increase in wage inequality in Britain and the United States in the 1980s and 1990s. In this paper we examine this argument using data from individuals and establishments. It is found that the presence of micro-electronic technologies in workplaces is associated with higher earnings, especially for skilled workers. Decompositions suggest that technical change could have been a cause of the increase in skills premium for highly skilled workers. Nevertheless, our view is that the correlation between wages and plant-level technology is mainly driven by the effect of high wages on the propensity to introduce new technologies rather than vice versa. This view is supported by simultaneous models of the wage-technology relationship.