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Income distribution inequality, globalization, and innovation: A general equilibrium simulation

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  • Fukiharu, T.

Abstract

Utilizing simulation approach, this paper examines if the income distribution inequality of a country expands through globalization and/or innovation, somewhat modifying the traditional Heckscher–Ohlin model. First, independently of innovation, the globalization is examined for a country A with two industries (commodities) and four consumers: the (aggregate) worker, the (aggregate) capitalist, and two entrepreneurs. It is shown that there is a clear tendency for the inequality to expand by globalization. Furthermore, when country A is small, the inequality-promoting tendency is stronger. Second, the innovation is examined independently of globalization, by the procedure in which the new-third industry (commodity) and the new-third entrepreneur are introduced, so that there are five consumers. When innovation emerges in country A in autarky, it is shown that the innovation has tendency to cause inequality expansion. Finally, the innovation and globalization are examined in an integrated manner. We start with the country in the second case. It is shown that when the new-third commodity is produced only in country A and is a non-traded commodity, inequality tends to expand through the globalization. It is shown, furthermore, that when the third commodity is produced in both countries and is a traded commodity, we have stronger tendency. Thus, there is a clear tendency for the inequality to expand through the globalization and/or innovation.

Suggested Citation

  • Fukiharu, T., 2013. "Income distribution inequality, globalization, and innovation: A general equilibrium simulation," Mathematics and Computers in Simulation (MATCOM), Elsevier, vol. 93(C), pages 117-127.
    • Handle: RePEc:eee:matcom:v:93:y:2013:i:c:p:117-127
    DOI: 10.1016/j.matcom.2012.08.001
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    References listed on IDEAS

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    Cited by:

    1. Michael McAleer & Felix Chan & Les Oxley, 2013. "Modeling and Simulation: An Overview," Working Papers in Economics 13/18, University of Canterbury, Department of Economics and Finance.
    2. Tao Tang & Lizeth Cuesta & Brayan Tillaguango & Rafael Alvarado & Abdul Rehman & Diana Bravo-Benavides & Natalia Zárate, 2022. "Causal Link between Technological Innovation and Inequality Moderated by Public Spending, Manufacturing, Agricultural Employment, and Export Diversification," Sustainability, MDPI, vol. 14(14), pages 1-25, July.
    3. Kjell Hausken & John F. Moxnes, 2019. "Innovation, Development and National Indices," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 141(3), pages 1165-1188, February.
    4. 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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