Innovation and Income Inequality: Exploring the Role of the Golden Triangle

This study explores the complex relationship between innovation and income inequality in 29 Asian economies from 2013 to 2022, emphasizing the mediating role of the Golden Triangle—comprising the state, civil society, and the market system. The study highlights how imbalances in the Golden Triangle's components can hinder the inclusive potential of innovation, exacerbating inequality. Using a Panel Smooth Transition Regression (PSTR) model, it captures the nonlinear dynamics of innovation’s impact on income distribution and identifies threshold effects driven by institutional imbalances. The study reveals that the impact of innovation on income inequality is highly dependent on the balance within the Golden Triangle—state, civil society, and the market. When this balance is maintained, innovation contributes to more equitable income distribution by fostering inclusive economic growth. However, when the Golden Triangle is imbalanced, innovation disproportionately benefits higher-income groups, widening income disparities. Specifically, excessive power imbalances reduce the income share of low-income groups and concentrate wealth among high-income groups. Power imbalances weaken the redistributive effects of innovation, reducing the income share of lower-income groups while concentrating wealth at the top. These results highlight the critical role of institutional frameworks in shaping the equity outcomes of innovation. The study offers valuable policy insights, emphasizing the need for balanced institutional structures to ensure that innovation promotes inclusive growth rather than deepening economic disparities in Asian economies.