CHAPTER 9 - SIGNIFICANT FEATURES IN THE LITERATURE ON INCOME INEQUALITY AND THE ROLE PLAYED BY INFORMATION TECHNOLOGY

This chapter surveys some of the literature on income inequality in the U.S. and the role played by the boom in information technology. Its purpose is to understand recent changes in income inequality, and how these were explained in the literature. Following this chapter, the methodology used for evaluating the impact of information technology on income inequality will be presented in chapter 10. Finally, chapter 11 will report and discuss the results of this analysis.

The first section of this chapter presents some facts about trends in income inequality in the United States since the 1970s, and reports the different theories explaining this trend. The second section focuses on the demand-side explanation of income inequality, describing the effects of the tremendous increase in information technology on labor demand and wage differentials. Finally, before analyzing income inequality across states in chapters 10 and 11, the third section of this chapter discusses regional income inequality across space (e.g., states and counties) in the United States.

Income, earnings and wages inequality are alternatively discussed in this chapter. Income is composed of earnings and transfers. Earnings include wages and non-wage income. Since wages usually account for the most part of income, inequality in income, earnings and wages should follow roughly the same trend and that is what is assumed in this study.