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Growing income inequality due to biased technological change

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  • Perera-Tallo, Fernando

Abstract

Inequality is rising in many countries. This paper presents a growth model in which technological change increases the income share of reproducible factors at the expense of non-reproducible ones. Agents are heterogeneous in wealth. Preferences imply that the saving rate increases with wealth. Consequently, assets (reproducible factor) are less equally distributed than raw labor (non-reproducible factor). This implies that technological change raises the share of the less equally distributed factor, increasing inequality along permanent growth path. When reproducible factors and the state of know-how are low, to adopt new technologies is not profitable, learning-by-doing and technological change ceases, arising stagnation.

Suggested Citation

  • Perera-Tallo, Fernando, 2017. "Growing income inequality due to biased technological change," Journal of Macroeconomics, Elsevier, vol. 52(C), pages 23-38.
    • Handle: RePEc:eee:jmacro:v:52:y:2017:i:c:p:23-38
    DOI: 10.1016/j.jmacro.2017.02.002
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    2. Law, Siong Hook & Naseem, N.A.M. & Lau, Wei Theng & Trinugroho, Irwan, 2020. "Can innovation improve income inequality? Evidence from panel data," Economic Systems, Elsevier, vol. 44(4).

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    More about this item

    Keywords

    Growth theory; Technological change; Inequality; Poverty traps;
    All these keywords.

    JEL classification:

    • D3 - Microeconomics - - Distribution
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development

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