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Technology, Entrepreneurship and Inequality: an Interpretative Model

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  • Alfonso Gambardella
  • Davide Ticchi

Abstract

This paper purports to explain some recent trends in several advanced economies. Our model shows that the rise of new scientific and technological opportunities, and particularly the opportunities to develop riskier technological projects, is at the basis of the blossoming of small-medium sized high-tech companies in several regions of the world. This phenomenon, which has been widely documented, and has given rise to several remarks about the growth and employment opportunities of "Silicon Valley" models of industrial activities and employment, is contrasted with an economy based on more stable employment conditions in large firms. Our key result is that both an economy based on large firms and one based on high-tech smaller enterprises lead to higher expected incomes. But while the former implies lower inequality in the sense of lower variance of incomes, the latter implies both higher permanent and transitory inequality. This is consistent with some recent empirical findings about the increase in the variance of incomes in the US and the UK.

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Bibliographic Info

Paper provided by Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy in its series LEM Papers Series with number 1999/11.

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Date of creation: 21 Nov 1999
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Handle: RePEc:ssa:lemwps:1999/11

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  1. Peter Gottschalk & Robert Moffitt, 1994. "The Growth of Earnings Instability in the U.S. Labor Market," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 25(2), pages 217-272.
  2. Richard Blundell & Ian Preston, 1998. "Consumption Inequality And Income Uncertainty," The Quarterly Journal of Economics, MIT Press, vol. 113(2), pages 603-640, May.
  3. Langlois, Richard N. & Robertson, Paul L., 1992. "Networks and innovation in a modular system: Lessons from the microcomputer and stereo component industries," Research Policy, Elsevier, vol. 21(4), pages 297-313, August.
  4. Kenney, Martin & von Burg, Urs, 1999. "Technology, Entrepreneurship and Path Dependence: Industrial Clustering in Silicon Valley and Route 128," Industrial and Corporate Change, Oxford University Press, vol. 8(1), pages 67-103, March.
  5. Holmstrom, Bengt, 1989. "Agency costs and innovation," Journal of Economic Behavior & Organization, Elsevier, vol. 12(3), pages 305-327, December.
  6. Rothschild, Michael & Stiglitz, Joseph E., 1970. "Increasing risk: I. A definition," Journal of Economic Theory, Elsevier, vol. 2(3), pages 225-243, September.
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