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The transition to the knowledge economy, labor market institutions, and income inequality in advanced democracies

Hope, David and Martelli, Angelo (2019) The transition to the knowledge economy, labor market institutions, and income inequality in advanced democracies. World Politics, 71 (2). pp. 236-288. ISSN 0043-8871

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Identification Number: 10.1017/S0043887118000333


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.

Item Type: Article
Additional Information: © 2019 Trustees of Princeton University
Divisions: Economics
European Institute
Subjects: H Social Sciences > HC Economic History and Conditions
H Social Sciences > HD Industries. Land use. Labor
Date Deposited: 28 Mar 2019 12:33
Last Modified: 20 Oct 2021 00:56

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