The impact of technological diffison on income inequality: A panel data analysis for the selected OECD countries

In order to increase the social welfare in a country, income distribution should take place in a more fair manner. However, in recent years the acceleration of the increase in income inequality in many countries of the world is quite noteworthy. Because of this noticeable inrease in income inequality coincided with rapid technological progress, a claim that "technological diffusion increases the income inequality" has emerged as one of the hypotesis. Determination of the underlying factors of income inequality is essential for creation of effective policies to fight with it. In this context, this study aimed to investigate the affect of technological diffusion on income inequality. In this study, the econometric method is panel data analysis that taking into account a combination of both time and cross section dimensions used for the period of 1997 to 2010, covering 28 OECD countries including Turkey. Income inequality is calculated by Theil index as the most appropriate measurement method. Technological diffusion is measured and modeled in three different ways: per capita patents, internet users, and total imports of products with high technological intensity. As a result of this study, "techological diffusion increases income inequality" hypotesis is confirmed. However, the study also found that higher quality in education reduces the negative impact of technological diffusion on income inequality.