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.