We study how workers’ wages respond to TFP-driven innovations in firms’ labor productivity.Using unique data with highly reliable firm-level output prices and quantities in themanufacturing sector in Sweden, we are able to derive measures of physical (as opposed torevenue) TFP to instrument...

Using data on product-level prices matched to the producing …rm’s unit labor cost, wereject the hypothesis of a full and immediate pass-through of marginal cost. Since wefocus on idiosyncratic variation, this does not …t the predictions of the Ma´ckowiak andWiederholt (2009) version of the...