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Inequality and Expectations in a Model of Technology Adoption and Growth

Author

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  • Surbhi Badhwar

    (Department of Economics, Delhi School of Economics)

  • Mausumi Das

    (Department of Economics, Delhi School of Economics)

Abstract

This paper highlights the role of initial wealth inequality in determining the technology adoption decision of firms, which in turn impacts upon the overall productivity in an economy. Wealth inequality interacts with producers’ expectations to generate mutiple equilibria: poor economies where initial wealth inequality is too high are perpetually stuck at a bad equilibrium with poor technology- economies with moderate degree of inequality can oscillate between the bad and the good equilibria depending on producers’ expectations- and rich economies with sufficiently low degree of wealth inequality always enjoy a self-sustaining good equilibrium, characterized by the adoption of advanced technology.

Suggested Citation

  • Surbhi Badhwar & Mausumi Das, 2017. "Inequality and Expectations in a Model of Technology Adoption and Growth," Working papers 274, Centre for Development Economics, Delhi School of Economics.
    • Handle: RePEc:cde:cdewps:274
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    References listed on IDEAS

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    1. Robert E. Hall & Charles I. Jones, 1999. "Why do Some Countries Produce So Much More Output Per Worker than Others?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 114(1), pages 83-116.
    2. Susanto Basu & David N. Weil, 1998. "Appropriate Technology and Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 113(4), pages 1025-1054.
    3. Atkinson, Anthony B & Stiglitz, Joseph E, 1969. "A New View of Technological Change," Economic Journal, Royal Economic Society, vol. 79(315), pages 573-578, September.
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