Innovation and within-firm wage inequalities: empirical evidence from major European countries

A large literature links wage inequality to technology, but it does not explicitly consider whether innovation contributes to shaping wage inequalities within firms. In this work we seek to fill this gap, exploiting a representative matched employer–employee survey on firms active in major European economies. We find that innovation tends to increase the wage-gap between high and low deciles of the within-firm wage distribution, while it reduces the wage-gap between wages of managers and low-layer employees. Moreover, firm size plays a crucial mediating role, as we find that large innovative firms are more egalitarian than their small counterparts, irrespective of the measure of within-firm wage inequality considered.