Innovation and skill premium

The relationship between innovation and skill premium is analysed on a panel of 12 countries for a 16-year span (2000–2015). According to a Schumpeterian view, a non-linear relationship between innovation and skill premium is found showing a threshold effect that reverses the relationship for relatively high levels of innovative activity. Moreover, the relationships change from convex to concave when variables representing different types of innovative activity are considered. In fact, with R&D a positive relationship with skill premium reverses once a threshold is exceeded, while the opposite holds for patents, for which the relationship is initially negative and then becomes positive. We argue that this is due to the different degrees of appropriability of the knowledge produced by innovators with these activities. We then show how to exploit these different patterns to provide a truly innovation-based analysis of the patterns of skill premium for the United States, France, Germany and Great Britain.