In the ongoing debate over what drives income inequality, a new study challenges conventional wisdom by shifting the spotlight away from technological innovation and toward financialization as the more potent force behind widening economic gaps.

For years, economists and policymakers have pointed to innovation - particularly in tech-heavy sectors - as a key contributor to inequality. The logic is simple: innovation breeds monopolies, rewards inventors disproportionately, and leaves low-skilled workers behind. But Juneyoung Lee and Keun Lee, the authors of a recent study, challenge this view - marking a distinct departure from the conclusions of French economist Philippe Aghion.

Their research finds that innovation, contrary to popular belief, does not significantly increase income inequality. Instead, it often stimulates capital investment, which can have a leveling effect across the economy. When firms innovate, they tend to reinvest in equipment, infrastructure, and workforce development. In contrast, financialization - the growing dominance of financial motives, markets, and institutions - emerges as a more direct and troubling driver of inequality. As economies become increasingly shaped by speculative investment and short-term profit strategies, wealth concentrates in the hands of those who control financial assets - primarily top earners - leaving the middle class behind.

This shift in understanding carries major policy implications. If innovation is not the villain, then stifling it through overregulation could be counterproductive. Instead, governments should focus on channeling innovation toward inclusive growth. That means supporting small and medium enterprises, expanding access to capital, and investing in education and skills that allow more people to participate in the innovation economy. At the same time, the findings call for a closer look at financial markets. Policies that curb excessive speculation, promote long-term investment, and ensure fair taxation of financial gains could help rein in inequality more effectively than innovation-targeted measures. Innovation, when paired with thoughtful investment and inclusive policies, can be a force for good. But unchecked financialization may be the real culprit behind the growing divide.