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Wealth Inequality in the Long Run: A Schumpeterian Growth Perspective
[The race between man and machine: implications of technology for growth, factor shares, and employment]

Author

Listed:
  • Jakob B Madsen
  • Antonio Minniti
  • Francesco Venturini

Abstract

This paper extends the analysis of the wealth–income ratio based on the neoclassical model in a Schumpeterian growth framework in which savings are channelled to both tangible and intangible capital investment. Using historical data for 21 OECD countries over the period 1860–2015, we find that the wealth–income ratio and, hence, wealth inequality, is negatively related to the rate of economic growth and positively related to the rates of investment in intangible and tangible assets, as predicted by the theory. Accounting for the innovation-induced counteracting growth effect on the wealth–income ratio, we show that the net effect of investment in intangibles on wealth inequality is positive. Our estimates suggest that intangibles have been a contributing factor in wealth inequality since 1860 and that the marked increase in the investment in intangible assets in the post–WWII period has been a significant driver of wealth inequality since the 1970s.

Suggested Citation

  • Jakob B Madsen & Antonio Minniti & Francesco Venturini, 2021. "Wealth Inequality in the Long Run: A Schumpeterian Growth Perspective [The race between man and machine: implications of technology for growth, factor shares, and employment]," The Economic Journal, Royal Economic Society, vol. 131(633), pages 476-497.
    • Handle: RePEc:oup:econjl:v:131:y:2021:i:633:p:476-497.
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    File URL: http://hdl.handle.net/10.1093/ej/ueaa082
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    1. repec:hal:spmain:info:hdl:2441/1j4v8sl4fc9a49ankmnhv6bb6a is not listed on IDEAS
    2. Iacopetta, Maurizio & Peretto, Pietro F., 2021. "Corporate governance and industrialization," European Economic Review, Elsevier, vol. 135(C).
    3. Jakob Madsen & Holger Strulik, 2023. "Testing unified growth theory: Technological progress and the child quantity‐quality tradeoff," Quantitative Economics, Econometric Society, vol. 14(1), pages 235-275, January.
    4. Kuhn, Michael & Minniti, Antonio & Prettner, Klaus & Venturini, Francesco, 2023. "Medical innovation, life expectancy, and economic growth," Department of Economics Working Paper Series 342, WU Vienna University of Economics and Business.
    5. repec:hal:spmain:info:hdl:2441/7nn6fpcnia859pog8o084b54ct is not listed on IDEAS
    6. Popoyan, Lilit & Napoletano, Mauro & Roventini, Andrea, 2020. "Winter is possibly not coming: Mitigating financial instability in an agent-based model with interbank market," Journal of Economic Dynamics and Control, Elsevier, vol. 117(C).
    7. Abeliansky, Ana Lucia & Prettner, Klaus, 2023. "Automation and population growth: Theory and cross-country evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 208(C), pages 345-358.
    8. Antonelli, Cristiano & Tubiana, Matteo, 2023. "The rate and direction of technological change and wealth and income inequalities in advanced countries," Technological Forecasting and Social Change, Elsevier, vol. 191(C).
    9. Chu, Angus C. & Peretto, Pietro F., 2023. "Innovation and inequality from stagnation to growth," European Economic Review, Elsevier, vol. 160(C).
    10. Lu Han, 2019. "The Mutable Geography of Firms' International Trade: Evidence and Macroeconomic Implications," Working Papers 201909, University of Liverpool, Department of Economics.
    11. Jakob B. Madsen & Antonio Minniti & Francesco Venturini, 2023. "The long‐run investment effect of taxation in OECD countries," Economica, London School of Economics and Political Science, vol. 90(358), pages 584-611, April.

    More about this item

    JEL classification:

    • D30 - Microeconomics - - Distribution - - - General
    • E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General
    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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