Income inequality and technological progress: The effect of R&D incentives, integration, and spillovers

Abstract

Recent years witnessed an increase in income inequality. Several explanations have been put forward. In the present paper, we consider a series of technologically related events that have been crucial for the increased income inequality, that is, public R&D incentives, increasing horizontal integration and spillover effects. We found that public R&D incentives and the increasing horizontal integration have biased the income distribution towards the top income group. In particular, the high-skilled workers involved in the R&D process have benefited enormously from this process. Similarly, capital owners have seen an increase in their profits, because of the reduction in product market competition and technological improvements in the production process. We found the effect of knowledge spillovers to be less clear-cut. We conclude discussing the implications of our results and suggesting possible solutions to the increasing income inequality. We call for the creation of supranational institutions, and for stricter legislation on competition and antitrust policy. 1 | INTRODUCTION Recent decades have witnessed a persistent and general increase in income inequality and polarization (Piketty & Saez, 2006). The World Economic Forum's Inclusive Growth and Development Report (2015) shows that income distribution is favoring the top two quintiles

Introduction to the thematic issue on “Regulation in health, environmental and innovation sectors”

“…The next three papers, written by Balletta and Tesoriere (2020), Dewit and Leahy (2020), and Osório and Alberto Pinto (2020) deal with various aspects of the regulation of innovation, in connection with other economic issues.…”

“…The paper by Osório and Alberto Pinto (2020) proposes to enlarge the usual compass of a standard two‐stage model of R&D and product market competition in industrial organization by invoking its known implications to explain an important global trends of a macro‐economic nature: increased economic inequality. The authors consider a series of technologically related exogenous trends or government policies that are put forward as key drivers of the increased income inequality: public R&D incentives, increasing horizontal integration (via mergers and acquisitions, R&D collaboration, minority and cross‐shareholding), and R&D spillover effects (see e.g., Amir et al, 2019 and Chalioti, 2019).…”