Skill-Biased Technological Change: Distributional and Political Implications

Sammanfattning: In this paper we synthesize theories on skill-biased technological change and political economy in order to understand the relationship between the widespread diffusion of information and communications technologies, the changes in the structure of the income distribution and the reduced levels of redistributive policies, witnessed since the 1970s. We construct a heuristic model where changes in relative supply and demand for skilled and unskilled labour, induced by skill-biased technological change, affect the distribution of income, the incentives and opportunities to organize politically and thus the relative power between different groups in society. Our model is able to explain a development where a more unequal society chooses to redistribute less, thus moving against the conventional idea that more unequal societies ought to redistribute more. We test the implications of the model using Fixed Effects-estimation on a panel data set of 10 OECD countries for the years 1980-2010. We find robust results that there exist relationships between technological change, relative incomes, political organization and policy outcomes. Our results imply that more research should be conducted in order to understand the complex relationship between technological development, income inequality and political power.