Causal Link between Technological Innovation and Inequality Moderated by Public Spending, Manufacturing, Agricultural Employment, and Export Diversification

Abstract

Sustainable Development Goal 10 (SDG10) proposes the reduction of inequalities. This research highlights the importance of considering short- and long-term mechanisms for designing and applying policies to reduce income inequality. Specifically, we test for the causal link between technological innovation and income inequality using a balanced panel data sample from 73 countries worldwide. The inequality–technological innovation relationship is moderated by public spending, manufacturing, employment in agriculture, and export diversification. We use quantile regression techniques to test the impact of technological innovation on income inequality. The results offer robust empirical evidence that in most quantiles, the impact of technological innovation on inequality is positive. This result suggests that the dark side of technological innovation is that it increases income inequality. Furthermore, we find that government spending reduces inequality across all quantiles, while the effect of employment in agriculture and export diversification is inconclusive. Those responsible for social policy towards the achievement of SDG10 must include the advantages of public spending to reduce social disparities and promote social cohesion within countries.