The Mechanism Of Action And The Empirical Research Of Technological Change On Income Inequality

Technological change is an inexhaustible motive force of economic growth, and a symbol of national core strength. In a knowledge-based economy, countries have more patents and master the core technology, will stand at a favorable position in global trade.However, with the technology changing and economic growth, the income gap is growing. Before the reform and opening up, China is one of the countries which have small income gap in the world. Planned economic system is the reason of the small income gap. After the reform and opening up, non-balanced development strategy plays an important role on economic growth improving living standards. But, with the deepening of reform and opening up, the income gap became wider. At the first of reform and opening up, Gini coefficient is 0.287, which indicate the income distribution is fair. The rate is 0.3 at 1987.At 2000, Gini coefficient reached to 0.4, the International Warning Line. The number is 0.47 at 2010.On the basis of previous studies, we consider that technological change will expand income gap in this paper. After combing technological change theories and income distribution theories, the author established a model which describes the relation between technological change and income distribution. Technological change effect income distribution through two means:the substitution effect and the technological directional effects. When the technological directional effect is greater than the substitution effect, the skill premium will rise. Technological change affect the income gap through three aspects:First, the level of workforce skills, skill-biased technological change will improve the human capital of high-skilled workers, while no significant impact on low-skilled workers, thereby the income gap increased; second, the regional trade, the income gap among regions associated with the rate of innovation and technology transfer rate, when the rate of technological innovation is greater than the rate of technology transfer, the relative wage rates between regions will increase; third, the inequality of opportunities, unequal educational opportunities between urban and rural areas exacerbated the urban and rural income gap between urban and rural areas, the inequality of profit sharing increased the income gap between monopoly industries and non-monopoly industries, the uneven interest expression mechanism exacerbate the income gap among the social classes.In the empirical research, co-integration test concluded that there are long-term equilibrium relationship between technological progress and income gap. Generalized technological change and narrow technological change are positive correlation to income gap. On error correction model test, error correction coefficient is 0.205822, which indicating that there is a positive feedback mechanism, which make technological progress exacerbate the income gap. On dynamic effects test, total factor productivity, invention patents and research staff have positive knock-on effects to the income gap; R&D expenditure has negative knock-on effects to income gap. On the variance decomposition, as time goes on, hysteretic Gini coefficient effect itself more and more unapparent, total factor productivity, invention patents, R&D expenditure and researcher staff effect Gini coefficient more and more apparently.