The Impact of Investments in New Digital Technologies on Wages – Worker-level Evidence from Germany

The strong rise of digitalization, automation, machine learning, and other related new digital technologies has led to an intense debate about their societal impacts. The transitions of occupations and the effects on labor demand and workers’ wages are still open questions. Research projects dealing with this issue often face a lack of data on the usage of new digital technologies. This paper uses a novel linked employer-employee data set that contains detailed information on establishments’ technological upgrading between 2011 and 2016, a recent period of rapid technological progress. Furthermore, we are the first to develop a digital tools index based on the German expert database BERUFENET. The new index contains detailed information on the work equipment that is used by workers. Hence, we observe the degree of digitalization on both the establishment level and the worker level. The data allow us to investigate the impact of technology investments on the wage growth of employees within establishments. Overall, the results from individual-level fixed effects estimates suggest that investments in new digital technologies at the establishment level positively affect the wages of the establishments’ workers. Sector-specific results show that investments in new digital technologies increase wages in knowledge-intensive production establishments and non-knowledge-intensive services. The wage growth effects of employees in digital pioneer establishments relative to the specific reference group of workers in digital latecomer establishments are most pronounced for low- and medium-skilled workers.