Technological Development: Models of Economic Growth and Distribution of Income

The economic development of vanguard countries during the last 40 years contributed to a large disturbance of the two key empirical regularities that underlie neoclassical economic theory: the effect of the “Bowley Law” or one of the “stylized facts” of Kaldor, is becoming increasingly less apparent; there is more and more empirical evidence that the famous Kuznets curve is no longer valid. Income inequality is growing in all developed countries, particularly in those like the USA, Great Britain, and Canada. Hence, it should be expected that a new stage of technological development, in the form of digital technologies, will contribute to the reinforcement of these trends. We propose modified neoclassical models of income growth and distribution, which take into account the new empirical regularities. Our results clearly show that if state institutions do not interfere with existing trends in the increase of inequality, then its growth will continue as there are no endogenous economic mechanisms that could restrict this process.