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Schumpeterian Entrepreneurs Meet Engel's Law: The Impact of Inequality on Innovation-Driven Growth

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  • Josef Zweimueller

Abstract

This paper analyzes the impact of inequality on growth when technical progress is driven by innovations and consumers have hierarchic preferences. Inequality has an impact on growth because it affects the structure and the dynamics of demand. Redistribution from very rich to very poor consumers is beneficial for growth. In general, the growth effect depends on the nature of redistribution. Due to a demand externality of R&D activites multiple equilibria are possible.

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Paper provided by Institute for Empirical Research in Economics - University of Zurich in its series IEW - Working Papers with number 009.

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Handle: RePEc:zur:iewwpx:009

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Keywords: innovation; growth; inequality; hierarchic demand; multiple equilibri;

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