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Inequality and Expectations in a Model of Technology Adoption and Growth

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  • Surbhi Badhwar
  • Mausumi Das

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 id:12208, eSocialSciences.
    • Handle: RePEc:ess:wpaper:id:12208
    Note: Institutional Papers
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    References listed on IDEAS

    as
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    5. Parente, Stephen L & Prescott, Edward C, 1994. "Barriers to Technology Adoption and Development," Journal of Political Economy, University of Chicago Press, vol. 102(2), pages 298-321, April.
    6. 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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