Drivers of income inequality in OECD countries

testing the Milanovic's TOP hypothesis

Danijela Lazović Vuković (Author), Jože Damijan (Author)

Abstract

This paper studies the drivers of rising income inequality in OECD countries between 1980 and 2018. By testing Milanovic’s TOP hypothesis in our sample, we measure the extent to which these distributional outcomes have been driven by either technological progress or globalization and the extent to which they have been influenced or mitigated by policy choices. The results of our empirical analysis provide the basis for confirming the TOP hypothesis. We find evidence that a 10 percent increase in trade openness, financial globalization, and technological progress is on average associated with a 0.4 percent, 0.3 percent, and 0.9 percent change in market inequality, respectively. At the same time, policies such as public expenditure on education, employment protection legislation and direct income taxes promote a more equal distribution. Our most notable finding, however, is that policies not only have a direct equalizing effect, but also mitigate the effects of globalization and technological progress on income inequality. The results of our study suggest that there are reasonable alternatives to anti-globalization strategies and that redistributive and labor market policies can be tailored to control inequality in the era of globalization and technology.

Keywords

razdelitev dohodka;dohodkovna neenakost;globalizacija;income distribution;pay gap;globalization;

Data

Language:	English
Year of publishing:	2025
Typology:	1.01 - Original Scientific Article
Organization:	UL EF - Faculty of Economics
UDC:	331.2
COBISS:	233496579
ISSN:	0954-349X
Views:	41
Downloads:	11
Average score:	0 (0 votes)
Metadata:

Other data

Secondary language:	Slovenian
Secondary keywords:	razdelitev dohodka;dohodkovna neenakost;globalizacija;
Type (COBISS):	Article
Pages:	str. 416-440
Issue:	ǂVol. ǂ74
Chronology:	Sep. 2025
DOI:	10.1016/j.strueco.2025.04.004
ID:	26347885