The shift to a knowledge economy amplified income inequality—especially for top earners—in advanced democracies despite technological gains.

This was true across eighteen OECD countries during 1970-2007, yet the US and UK saw less pronounced increases relative to other nations with similar technology diffusion.

Data & Methods

Eighteen Organization for Economic Co-operation and Development (OECD) Countries (Australia, Canada, France, Germany, Italy, Japan, Netherlands, Norway, Sweden, Switzerland, United Kingdom, United States)

1970-2007 Time Period

Panel Data Analysis Technique

Robust Statistical Evidence Provided

Key Findings

Strong labor institutions—like coordinated bargaining and high union density—significantly reduced the negative impact of knowledge economy expansion on wage equality.

These systems helped maintain wage solidarity despite technology-driven pressures for elite advantage.

Contrasting sharply with nations like the US and UK, countries such as Germany and Sweden exhibited stronger institutional buffers against inequality rise.

Implications

Labor market institutions remain crucial tools in managing income disparities during economic transitions toward knowledge-based work arrangements.

The authors argue that these established systems effectively counter narratives suggesting technology inherently widens socioeconomic gaps.