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Does technological progress widen the income gap? Evidence from OECD countries

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  • Xu, Keyi
  • Chen, Yangfen

Abstract

Rapid technological progress (TP) intensifies inequality concerns. Clarifying how TP reshapes income distribution and its mechanisms is crucial for harnessing its benefits while safeguarding social equity. Based on panel data from 36 OECD countries spanning 1992–2022, this study empirically examines the impact of TP on income inequality (INC). Results reveal a significant U-shaped relationship between TP and INC, exhibiting heterogeneity across income levels, trade openness, and factor endowments. TP affects INC through labor productivity gap (LPG) and employment structure (ES). Government subsidies (GS) moderate the U-shaped relationship, delaying inequality's rise. Specifically, GS flattens this curve in high-income countries but steepens it in upper-middle-income ones. Given rapid technological changes, global governance should promote technology transfer and trade cooperation while regulating income redistribution through subsidies. Specifically, capital-intensive countries should increase vocational education and skill subsidies, while labor-intensive countries should expand access to high-quality education and training to convert population dividends into talent dividends.

Suggested Citation

  • Xu, Keyi & Chen, Yangfen, 2026. "Does technological progress widen the income gap? Evidence from OECD countries," Economic Analysis and Policy, Elsevier, vol. 91(C), pages 539-558.
    • Handle: RePEc:eee:ecanpo:v:91:y:2026:i:c:p:539-558
    DOI: 10.1016/j.eap.2026.03.029
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