Innovation and inequality

It is since the seminal contribution of Simon Kuznets (1955), that the analysis of the trade-off between growth and inequality has become a central topic in the economic literature. The conventional view about economic inequality is that its recently increasing levels come to depend mainly from a set of not mutually exclusive but reciprocally reinforcing factors that are identified respectively in technological change, globalisation and the role of institutions. This survey will analyze the impact of technological change on inequality, by focusing on the within-country and the between country perspectives. As for within-country inequality, it acknowledges that technology serves as a key driver of changes in wages and income. The crucial role of technological change is thus mainly linked to the so-called skill-biased technical change hypothesis, according to which skilled workers are favoured by the rapid diffusion of technological change, which requires higher skills with respect to the preceding lower technological level. As a result, wage premium of the skilled workers exceeds that of the unskilled ones, and inequality becomes an inevitable outcome. The between-country analysis of the relationships between technical change and inequality, focuses on the role of institutions in shaping more favourable environments to the diffusion of technical change that, besides an effect on within-country inequality, engenders favorable dynamics within the global economy that allows some countries to experience higher levels of income with respect to others. In this way increasing the level of global inequality.Non