Technological Change, Labour Demand and Income Distribution in European Union Countries

Abstract

This paper provides empirical evidence of the link between technological change in different technology intensive sectors and overall income (and not simply earnings) inequality in some EU eastern and western countries. In a first step, skill-biased technological change hypothesis is tested distinguishing various technology intensive sectors: results confirm the presence of skill-complementary technologies but also stress the skill-replacing character of other ones incorporated into investment flows. The second step places the evolutions of sector skilled-labour demand among other traditional determinants of income inequality. Findings reveal significant and composite impacts of skilled-labour demand, strongly depending on sectoral differences in technological intensity.FDI, technological change, skills, income distribution