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Testing Schumpeterian growth theory: the role of income inequality as a determinant of research and development expenditures (developed economies) and successful technology transfers (developing economies)

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  • Marasco, Antonio

Abstract

This paper tests a strand of Schumpeterian growth theory that predicts a role for income inequality as a determinant of technology-enhancing activities, in the shape of innovation in the North and of technology transfers in the South. The analysis is conducted at three different levels: by world region, by industrial sector and by country. While the analysis by world region does not produce any clear cut evidence, the analysis by sector yields some evidence that income inequality in the South may have a positive effect on research and development (RnD) expenditures in some industrial sectors located in the North, such as non electricals and pharmaceuticals. Income inequality in both world regions seems also to play a role on the amount of technology that is transferred to the developing world. The sign of the effect might be positive for some sectors and negative for others, but the overall impact is probably negative in the case of Northern income inequality and positive with respect to Southern income inequality. However, the strongest evidence came from the cross-country analysis. We found that for each of the 15 OECD countries, foreign income inequality in the countries that trade the most with them, had a positive effect on the research and development expenditure carried out in those 15 countries. Such evidence appeared robust to whether we introduced control variables or not, and to several ways of measuring the dependent variable and the independent variables concerned. The cross-country analysis also yielded some evidence of a positive effect of both domestic and foreign (mainly developed world) income inequality on the level of technology transfers to developing countries.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 4785.

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Date of creation: 06 Jan 2005
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Handle: RePEc:pra:mprapa:4785

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Keywords: Innovation; RnD Expenditures; Technology Transfers; High Tech Exports; Income Inequality;

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  1. Howitt, Peter & Griffith, Rachel & Aghion, Philippe & Blundell, Richard & Bloom, Nick, 2005. "Competition and Innovation: An Inverted-U Relationship," Scholarly Articles 4481507, Harvard University Department of Economics.
  2. Oded Galor & Omer Moav, 1999. "From Physical to Human Capital Accumulation: Inequality in the Process of Development," Working Papers 99-27, Brown University, Department of Economics.
  3. Rachel Griffith & Stephen Redding & John Van Reenen, 2000. "Mapping the two faces of R&D: productivity growth in a panel of OECD industries," IFS Working Papers W00/02, Institute for Fiscal Studies.
  4. Bruno Van Pottelsberghe & Dominique Guellec, 2001. "R&D and productivity growth: a panel data analysis of 16 OECD countries," ULB Institutional Repository 2013/6219, ULB -- Universite Libre de Bruxelles.
  5. Xavier Sala-i-Martin, 2002. "The Disturbing "Rise" of Global Income Inequality," NBER Working Papers 8904, National Bureau of Economic Research, Inc.
  6. Xavier Sala-i-Martin, 2002. "The World Distribution of Income (estimated from Individual Country Distributions)," NBER Working Papers 8933, National Bureau of Economic Research, Inc.
  7. Mani, Sunil, 2000. "Exports of High Technology Products from Developing Countries: Is it Real or a Statistical Artifact?," UNU-INTECH Discussion Paper Series 1, United Nations University - INTECH.
  8. Deininger, Klaus & Squire, Lyn, 1996. "A New Data Set Measuring Income Inequality," World Bank Economic Review, World Bank Group, vol. 10(3), pages 565-91, September.
  9. Josef Zweimüller & Johann K. Brunner, 2005. "Innovation And Growth With Rich And Poor Consumers," Metroeconomica, Wiley Blackwell, vol. 56(2), pages 233-262, 05.
  10. Marasco, Antonio, 2002. "An endogenous growth model with quality ladders and consumers’ heterogeneity," MPRA Paper 5389, University Library of Munich, Germany, revised Jan 2007.
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