The transition to the knowledge economy, labor market institutions, and income inequality in advanced democracies

David Hope and Angelo Martelli

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: The transition from Fordism to the knowledge economy in the world's advanced democracies was underpinned by the revolution in information and communications technology (ICT). The introduction and rapid diffusion of ICT pushed up wages for college-educated workers with complementary skills and allowed top managers and CEOs to reap greater rewards for their own talents. Despite these common pressures, income inequality did not rise to the same extent everywhere; income in the Anglo-Saxon countries remains particularly unequally distributed. To shed new light on this puzzle, the authors carry out a panel data analysis of eighteen OECD countries between 1970 and 2007. Their analysis stands apart from the existing empirical literature by taking a comparative perspective. The article examines the extent to which the relationship between the knowledge economy and income inequality is influenced by national labor market institutions. The authors find that the expansion of knowledge employment is positively associated with both the 90/10 wage ratio and the income share of the top 1 percent, but that these effects are mitigated by the presence of strong labor market institutions, such as coordinated wage bargaining, strict employment protection legislation, high union density, and high collective bargaining coverage. The authors provide robust evidence against the argument that industrial relations systems are no longer important safeguards of wage solidarity in the knowledge economy.

Keywords: ICT; income inequality; industrial relations; information and communications technology; knowledge economy; labor market institutions; technological change; wage inequality (search for similar items in EconPapers)
JEL-codes: J01 N0 R14 (search for similar items in EconPapers)
Pages: 53 pages
Date: 2019-04-01
New Economics Papers: this item is included in nep-his, nep-ict and nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Published in World Politics, 1, April, 2019, 71(2), pp. 236-288. ISSN: 0043-8871

Downloads: (external link)
http://eprints.lse.ac.uk/100382/ Open access version. (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:100382

Access Statistics for this paper

More papers in LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library LSE Library Portugal Street London, WC2A 2HD, U.K.. Contact information at EDIRC.
Bibliographic data for series maintained by LSERO Manager ().