Essays on Technological Change and Income Distribution

Guido Pialli, UNU-MERIT

About the speaker

Over the last several decades, there has been extensive evidence of the rise in income inequality in advanced economies. This work analyses the relationship between technological change and income distribution using the tools provided by the economics of knowledge. Specifically, the intrinsic characteristics of the innovation process and their implications for the functional and personal income distributions are analysed. The dissertation is articulated as follows. The first chapter focuses on the characteristics of the innovation process to advance the hypothesis that when technological change is based on bottom-up and localised processes exploiting and valorising workers' competence, the direction of technological change is labour- rather than- capital-biased. The econometric analysis based on a sample of European regions confirms that, where the rate of technological change based upon incremental and localised improvements is faster, the share of income going to labour is greater. These results question the collective wisdom finding a generalised decline in the labour share of income due to capital-augmenting technological change. Second, the existing contributions to the direction of technological change debate neglect the changes in the elasticity of substitution as an additional source of biased innovation. On the contrary, the second chapter demonstrates an increase in the elasticity of substitution over time within nine advanced economies. Finally, the increase in top income inequality and the growing disparities even within high-skilled workers have been documented, but little effort has been provided to understand their causes. The third chapter explains the increasing wage dispersion, concentrated mainly among workers engaged in non-routine cognitive tasks, with the increased demand for knowledge-based services. The results of the econometric analysis performed on a sample of US cities observed for the period 1980-2010 support previous descriptive evidence of the rising top-income shares due to scale-based phenomena in knowledge-based sectors.

Venue: Online:

Date: 19 December 2022

Time: 10:00 - 12:30  CET