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The Transition to the Knowledge Economy, Labor Market Institutions, and Income Inequality in Advanced Democracies

Published online by Cambridge University Press:  12 March 2019

David Hope Open the ORCID record for David Hope [Opens in a new window]  and
Angelo Martelli
David Hope
Affiliation:
Department of Political Economy, King’s College London email: david.hope@kcl.ac.uk
Angelo Martelli
Affiliation:
London School of Economics European Institute email: a.martelli@lse.ac.uk
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Abstract

The transition from Fordism to the knowledge economy in the world’s advanced democracies was underpinned by the revolution in information and communications technology (ict). The introduction and rapid diffusion of ict pushed up wages for college-educated workers with complementary skills and allowed top managers and CEOs to reap greater rewards for their own talents. Despite these common pressures, income inequality did not rise to the same extent everywhere; income in the Anglo-Saxon countries remains particularly unequally distributed. To shed new light on this puzzle, the authors carry out a panel data analysis of eighteen oecd countries between 1970 and 2007. Their analysis stands apart from the existing empirical literature by taking a comparative perspective. The article examines the extent to which the relationship between the knowledge economy and income inequality is influenced by national labor market institutions. The authors find that the expansion of knowledge employment is positively associated with both the 90/10 wage ratio and the income share of the top 1 percent, but that these effects are mitigated by the presence of strong labor market institutions, such as coordinated wage bargaining, strict employment protection legislation, high union density, and high collective bargaining coverage. The authors provide robust evidence against the argument that industrial relations systems are no longer important safeguards of wage solidarity in the knowledge economy.

Keywords

ictincome inequalityindustrial relationsinformation and communications technologyknowledge economylabor market institutionstechnological changewage inequality
Type
Research Article
Information
World Politics , Volume 71 , Issue 2 , April 2019 , pp. 236 - 288
Copyright
Copyright © Trustees of Princeton University 2019 

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