29/09/2026 - LECL 61 - 12:45

Giacomo Lo Conte

(UCLouvain, LIDAM, IRES)

will give a presentation on 

Exposure to innovation and labor market dynamics: Evidence from the German manufacturing sectors

Abstract: 

This work examines the effects of innovation on wage dynamics among German manufacturing workers. We combine linked employer-employee data with patent data from PatStat to study the causal impact of innovation at the local-industrial level and across workers' occupations. To address endogeneity, we construct an instrument for local-industrial trends in innovation that exploits the network of patent citations. Our estimates show that innovation increases wage inequality, reflecting a differential exposure of routine, manual, and abstract workers to the returns from innovation.

We then present a toy model of how labor market institutions, namely Collective Bargaining Agreements (CBAs), mediate this relationship at the micro level, and test its predictions on our data. We find that abstract workers capture innovation returns directly and are not responsive to the collective bargaining channel, whereas routine and manual workers have greater scope to benefit from innovation depending on the type of bargaining regime (decentralized vs.centralized). Labor market institutions thus represent a fundamental but often overlooked dimension in shaping the relationship between innovation and wage dynamics.

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