Does the digital economy promote or inhibit income inequality?

ABSTRACT

Digitalisation and technological developments are profoundly changing the socioeconomic structure of society and people's lifestyles, which may have a significant impact on the distribution of income among different groups of people. This study conducted a quantitative investigation into the impact of the digital economy on income inequality based on the skill bias theory. First, empirical model analysis showed that digital economy has a linear dampening effect on income inequality and that there is no non-linear relationship. Then, the study analyzed the mechanisms underlying this relationship, which revealed that mining and remittances suppress income inequality in the presence of digital economy, while government spending promotes income inequality. Finally, heterogeneity analysis indicated that the suppressive impact of digital economy on income inequality in capitalist countries is stronger than in ex-communist countries. These findings will not only help to achieve social equity, but also provide a strategic direction for economic development to make the dividends of the digital economy more inclusive.