A Short-Run View of What Computers Do: Evidence from a UK Tax Incentive
43 Pages Posted: 1 Aug 2014 Last revised: 17 Sep 2016
Date Written: August 16, 2016
We study the short-run, causal effect of Information and Communication Technology (ICT) adoption on the employment and wage distribution. We exploit a natural experiment generated by a tax allowance on ICT investments and find that the primary effect of ICT is to complement non-routine, cognitive-intensive work. We also find that the ICT investments led to organizational changes that were associated with increased inequality within the firm and we discuss our findings in the context of theories of ICT adoption and wage inequality. We find that tasks-based models of technological change best fit the patterns that we observe.
Keywords: ICT, job polarization, wage inequality, skill-biased technical change, organizational change, tax incentive
JEL Classification: J24, J31, J82, O33
Suggested Citation: Suggested Citation