Has Information and Communication Technology Changed the Dynamics of Inequality? An Empirical Study from the Knowledge Hierarchy Perspective

Wage inequality in the U.S. grew rapidly from the early 1980s, and information and communication technology (ICT) has been blamed for this social problem. Although information technology (IT) and communication technology (CT) have different effects, few empirical studies consider their distinct impacts on the dynamics of inequality. We examine the distinct impacts of IT and CT on inequality from the knowledge hierarchy perspective for the period 2004-2014, using comprehensive data on wages, employment, and ICT capital. Our findings suggest that IT and CT deepen wage inequality between the production and non-production layers. However, within the production layer, IT acts as a decentralizing force and CT acts as a centralizing force. Furthermore, ICT increases the relative demand for managers in the top layer and decreases demand for supervisors in the middle layer, contributing to job polarization. Our results imply the significant role of ICT in wage inequality, distinct from other technologies.