Technological Kuznets Curve? Technology, Income Inequality, and Government Policy

Abstract

Existing research suggests the dual effects of technological advances on income inequality. This study proposes a “technological Kuznets Curve (TKC),” in which the technology-inequality relationship changes with the level of technological development. Two versions of TKC are developed, based on the role of technology as the engine of growth (leading to the inversely U-shaped relationship) and on the nature of Schumpeterian innovation (leading to the U-shaped relationship). The findings from the study’s data analysis suggest the U-shaped version of TKC, with strong empirical support for government redistributive policy in reducing technology-induced inequality.