Winner-takes-all or inclusive growth? The impact of digitalization on inter-firm wage inequality: evidence from China

Shengming Hu, Minghao Chen, Xujun Liu and Hui Wang

Applied Economics, 2025, vol. 57, issue 37, 5777-5792

Abstract: While previous research explores the impact of digitalization on individual firms’ performance, its potential to generate wage changes among firms with different characteristics, and subsequent inter-firm wage inequality, is often overlooked. Therefore, using China’s city panel data from 2003 to 2019, we assess the impact of digitalization on inter-firm wage inequality. Our findings reveal that digitalization increases inter-firm wage inequality in China, which is further validated using robustness tests. Mechanism tests reveal that digitalization tends to enhance high-wage firms’ productivity, widening the inter-firm productivity gap and exacerbating wage inequality. Further analysis indicates that digitalization boosts productivity more strongly in state-owned firms and those with higher research and development expenditure or more skilled talent, which typically pay higher wages, further widening the wage gap between firms. Our study supports the winner-takes-all perspective in the digital era, suggesting that the government should actively implement measures to protect vulnerable firms and maintain social equity.

Date: 2025
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DOI: 10.1080/00036846.2024.2369723

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