Income inequality in the knowledge economy

Abstract

Advanced economies are characterised by the parallel increase of income inequality and of the role of knowledge intensive activities that substitute the manufacturing industry at the core of the system. Radical changes in the organisation of the generation, appropriation and exploitation of technological knowledge increase the levels of knowledge rents. The shift to the knowledge economy triggers the polarisation of labour markets between creative workers, able to participate into the rents associated with knowledge exploitation, and standard labour, exposed to the fall of employment in progressively de-unionised manufacturing industries. The theoretical framework introduced associates such knowledge-intensive structural change to the rising levels of income inequality. The empirical section provides support for this correlation estimating on the evidence of 20 OECD countries from 1990 to 2016 a negative sign for within income inequality regressed on the quota of KIBS and R&D investments.