Edited by Ugo Mattei and John D. Haskell
Technology can affect the distribution of income directly via its influence on both the bargaining power of different parties and the marginal product of different factors of production. This chapter focuses mainly on the first route. The role of power is transparent in the case of medieval choke points, but modern network technologies have similar features. There is also substantial evidence – from truckers and retail clerks to CEOs – that power affects the determination of wages. But power relations inevitably have institutional dimensions; regulatory frameworks influence industry structures and the market power of large companies as well as the parameters that determine the earnings of different groups of workers. The institutional framework is arrived at through complex social and political processes. Technology, however, may exert some influence on the course of those processes. Changes in the distribution of income or wealth can be attributed to political choice and institutional change, to technological change and its effects on market outcomes, or to a combination of the two. Some economists emphasize the political/institutional story, others the technology/market one. In most developed countries, the inequality of income fell markedly sometime around 1940: this was the ‘Great Compression’. Inequality began to rise again around 1980: we can call this the neoliberal period. Both the onset of the Great Compression, and its end in the neoliberal period, are marked by institutional sea changes, roughly contemporaneous (though by no means uniform) across developed capitalist countries.
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