Technological change, rent and income inequalities: A Schumpeterian approach

Abstract

Increasing levels of income inequality have recently attracted much attention. The literature has concentrated on the hypothesis that increasing levels of income inequality are the cause of slow growth and social unbalances. This paper contributes to exploring an alternative hypothesis according to which increasing levels of income inequality are the consequence, rather than the cause, of slow growth and more specifically of the slowing pace of technological change. The paper articulates the Schumpeterian hypothesis that the rate of technological change exerts a significant influence in reducing income distribution. Due to the powerful effects of creative destruction, the rate of technological change engenders a reduction in wealth and rent inequalities that are highly skewed and, consequently, limits income inequality. We test this hypothesis in an empirical exercise by implementing quantile regressions on a large dataset of advanced and industrializing economies. The inequality diminishing effect of technological change holds along the entire income inequality distribution, but exhibits larger effects in countries where the concentration of wealth and, consequently, income asymmetries are stronger. These results have novel welfare implications and suggest some crucial insights for economic policy analysis.

Innovations and income inequalities – a comparative study

“…For GDP per capita and financial openness conducted analysis confirms the results of Antonelli & Gehringer (2017), however, in the case analyzed here neither trade openness nor government expenditures play a significant role, although the signs of their coefficients are the same.…”

Analysing the Impact of Regulation on Disruptive Innovations: The Case of Wireless Technology

“…Therefore, if regulation contributes to such centralised decision making and if the outcome of the decision making is affected by the presence of sunk costs, then this contribution shapes the entire way of technological change. Meanwhile, active participation of newcomers in innovation activity may facilitate the process of creative destruction and, thereby, result not only in positive economic effects, but also in alleviation of socio-economic problems (see., e.g., an analysis of the impact of this process on income inequalities in Antonelli and Agnieszka 2016).…”

Investigating into the Employment and Income Inequality Nexus in Sub-Saharan Africa

“…Aghion (2002) explains that unskilled workers remain in old sectors with prevailing wages. Innovation is expected to limit income inequality through the Schumpeterian concept of creative destruction (Schumpeter, 1947;Antonelli & Gehringer, 2017). Technological change can theoretically lead to both a reduction in wage dispersion where large portions of the existing capital stock lose its value with new innovations.…”