Individualism, innovation, and inequality: Exploring the nexus

Daniel V. Santos, Oscar Afonso and Paulo B. Vasconcelos

Economic Systems, 2025, vol. 49, issue 1

Abstract: We provide an alternative explanation for the direction of technological change and the related wage inequality between skilled and unskilled workers. To this end, we formulate a skill-biased technological change model in which households’ decisions on consumption, savings, and human-capital accumulation are influenced by the level of individualism. We conclude that more individualistic cultures experience higher technological-knowledge bias toward skilled technologies, larger output growth rates, and higher wage inequality between skilled and unskilled workers. We also find that union bargaining only reduces wage inequality between skilled and unskilled at moderate levels of individualism, while introducing redistributive income taxes does not necessarily reduce income inequality.

Keywords: Skill-biased technological change; Skill premium; Individualism; Innovation; Human-capital accumulation; Inequality (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecosys:v:49:y:2025:i:1:s0939362524000748

DOI: 10.1016/j.ecosys.2024.101252

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