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Exploring the Existence of a Short-Run Kuznets Curve: Does the Fourth Industrial Revolution Affect Income distribution?

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  • Castaldo Angelo

    (Department of Juridical and Economic Studies, Institute of Economics and Finance, Sapienza University of Rome, P.le Aldo Moro, 5, Roma, 00185, Italy)

  • De Bonis Valeria

    (Department of Juridical and Economic Studies, Institute of Economics and Finance, Sapienza University of Rome, P.le Aldo Moro, 5, Roma, 00185, Italy)

Abstract

The link between technological change and income inequality is central to the Kuznets hypothesis. In a time of technological transition towards the digitization and intelligentization of manufacturing processes (the fourth industrial revolution), this paper investigates the relationship between economic development and income distribution through the implementation of both a system generalized method of moments (system-GMM) and a semiparametric fixed effects model approach. Based on a panel of 31 European-area countries over a period of 12 years (2007–2018), accounting for the endogeneity bias arising from the transitional dynamics of income inequality and per capita income, our main results confirm the existence of an inverted U-shaped relationship between income inequality and economic development. Moreover, our analysis shows that the change in the share of labour employed in high-tech sectors is the main driver of this evolutionary pattern.

Suggested Citation

  • Castaldo Angelo & De Bonis Valeria, 2023. "Exploring the Existence of a Short-Run Kuznets Curve: Does the Fourth Industrial Revolution Affect Income distribution?," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 23(2), pages 515-524, April.
    • Handle: RePEc:bpj:bejeap:v:23:y:2023:i:2:p:515-524:n:13
    DOI: 10.1515/bejeap-2020-0231
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    More about this item

    Keywords

    income distribution; technological shocks; Kuznets curve; GMM;
    All these keywords.

    JEL classification:

    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O52 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Europe

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