This article proposes a macrodynamic model that takes into account the joint determination of intra-working-class income distribution and knowledge-intensive technological change. Our model highlights two opposing effects of technological change at play: (i) technological innovation promotes a positive structural change and hence boosts net exports and output growth; (ii) technological change, on the other hand, disproportionately affects unskilled workers, which worsens the intra-working-class income distribution and slows down economic growth. Therefore, our model demonstrates that the net impact of technological change on capital accumulation and output growth is ambiguous and hence is a parametric question. Lastly, we show that income transfer and public investments in higher education may be of paramount importance to alleviating the unwanted effects of a contractionary wave of technological change and so promoting a sustained economic recovery.
We are grateful to Gilberto Lima, Gabriel Porcile, Gary Dimsky, Joanilio Teixeira, and two anonymous referees for useful comments and suggestions. The usual disclaimer applies.