New empirics about innovation and inequality in Europe

Abstract

The increase of internal inequality is one of the consequences of the recent turbulence of the World economy and the crisis’ effects in advanced countries. At the same time, to face the new information age and the phenomena of digitalization and robotization, investment in research and development (R&D) is an indisputable action for economic and social progress. The combination of these two dynamics opens new debates about the still unresolved relationship between innovation and inequality. This paper contrasts the postulates of the existing body of theory and the existing empirical evidence to argue that the positive co-evolution of inequality reduction and technological progress in Europe is not a lineal process, but it requires to analyze its complexity and what sort of combination of factors would best explain it. The findings are based on regressions with panel data from a sample of 20 countries in the period 1995-2017, and they show the relevance of structural and institutional aspects within the European region. In particular, two clusters of countries seem to define a dissimilar behavior in the relationship between inequality and innovation and a virtuous circle defined by the contribution of social protection and innovation policies contributes to a favorable solution of the puzzle between innovation and inequality.