Computerization and wage inequality between and within German work establishments

Joe King, Malte Reichelt, Matt L. Huffman

    Research output: Contribution to journalArticle

    Abstract

    Recent evidence has revealed that a significant share of the rise in wage inequality has occurred at the establishment level, underscoring the importance of workplace-level analyses for understanding growing inequality. Using longitudinal matched employment data from Germany, we provide new insights into how investments in information and communication technologies (ICT) affect earnings inequality between and within establishments over time. Focusing on the mechanisms of inequality, cross-sectional estimates provide evidence of both skill- and class-biased technological change; however, establishment fixed effects models reveal that this relationship is driven by unobserved establishment heterogeneity. Despite a strong relationship between computerization and the rise in workplace heterogeneity, we find little evidence of a causal effect of computers on changes in establishment-level inequality. Rather, establishments that invest more greatly in ICT pay on average better wages and exhibit higher within-establishment inequality. These results challenge dominant explanations about the role of computerization in rising inequality, while also reinforcing the necessity of using organizational data to study inequality processes.

    Original languageEnglish (US)
    Pages (from-to)67-77
    Number of pages11
    JournalResearch in Social Stratification and Mobility
    Volume47
    DOIs
    StatePublished - Feb 1 2017

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    wage
    communication technology
    workplace
    information technology
    evidence
    technological change

    Keywords

    • Computerization
    • Matched employer-employee data
    • Wage inequality
    • Workplace heterogeneity

    ASJC Scopus subject areas

    • Social Sciences (miscellaneous)

    Cite this

    Computerization and wage inequality between and within German work establishments. / King, Joe; Reichelt, Malte; Huffman, Matt L.

    In: Research in Social Stratification and Mobility, Vol. 47, 01.02.2017, p. 67-77.

    Research output: Contribution to journalArticle

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