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

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Josef Zweimueller

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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 - IEW in its series IEW - Working Papers with number iewwp009.

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Handle: RePEc:zur:iewwpx:009

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

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Find related papers by JEL classification:
O14 - Economic Development, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
O15 - Economic Development, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
O31 - Economic Development, Technological Change, and Growth - - Technological Change - - - Innovation and Invention: Processes and Incentives
H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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    Other versions:
  2. Falkinger, Josef & Zweimuller, Josef, 1996. "The cross-country Engel curve for product diversification," Structural Change and Economic Dynamics, Elsevier, vol. 7(1), pages 79-97, March. [Downloadable!] (restricted)
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    Other versions:
  4. Alesina, Alberto & Rodrik, Dani, 1994. "Distributive Politics and Economic Growth," The Quarterly Journal of Economics, MIT Press, vol. 109(2), pages 465-90, May. [Downloadable!] (restricted)
    Other versions:
  5. Talmain, G. & Chou, C.F., 1996. "Redistribution and Growth; Pareto Improvements," UBC Departmental Archives 96-03, UBC Department of Economics.
  6. Alwyn Young, 1993. "Substitution and Complementarity in Endogenous Innovation," NBER Working Papers 4256, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  8. Falkinger, Josef, 1994. "An Engelian model of growth and innovation with hierarchic consumer demand and unequal incomes," Ricerche Economiche, Elsevier, vol. 48(2), pages 123-139, June. [Downloadable!] (restricted)
  9. Bénabou, Roland, 1996. "Inequality and Growth," CEPR Discussion Papers 1450, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  10. Matsuyama, Kiminori, 1992. "The market size, entrepreneurship, and the big push," Journal of the Japanese and International Economies, Elsevier, vol. 6(4), pages 347-364, December. [Downloadable!] (restricted)
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  11. Murphy, Kevin M & Shleifer, Andrei & Vishny, Robert W, 1989. "Industrialization and the Big Push," Journal of Political Economy, University of Chicago Press, vol. 97(5), pages 1003-26, October. [Downloadable!] (restricted)
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  12. Persson, Torsten & Tabellini, Guido, 1994. "Is Inequality Harmful for Growth?," American Economic Review, American Economic Association, vol. 84(3), pages 600-621, June. [Downloadable!] (restricted)
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  13. Chou, Chien-Fu & Talmain, Gabriel, 1996. " Redistribution and Growth: Pareto Improvements," Journal of Economic Growth, Springer, vol. 1(4), pages 505-23, December.
  14. Baland, Jean-Marie & Ray, Debraj, 1991. "Why does asset inequality affect unemployment? A study of the demand composition problem," Journal of Development Economics, Elsevier, vol. 35(1), pages 69-92, January. [Downloadable!] (restricted)
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  16. Krugman, Paul, 1991. "History versus Expectations," The Quarterly Journal of Economics, MIT Press, vol. 106(2), pages 651-67, May. [Downloadable!] (restricted)
  17. Chol-Won Li., . "Inequality and Growth: A Schumpeterian Perspective," Working Papers 9609, Department of Economics, University of Glasgow, revised Feb 1998. [Downloadable!]
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  19. Romer, Paul M, 1987. "Growth Based on Increasing Returns Due to Specialization," American Economic Review, American Economic Association, vol. 77(2), pages 56-62, May. [Downloadable!] (restricted)
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    Other versions:
  21. Clarke, George R. G., 1995. "More evidence on income distribution and growth," Journal of Development Economics, Elsevier, vol. 47(2), pages 403-427, August. [Downloadable!] (restricted)
    Other versions:
  22. Young, Alwyn, 1993. "Substitution and Complementarity in Endogenous Innovation," The Quarterly Journal of Economics, MIT Press, vol. 108(3), pages 775-807, August. [Downloadable!] (restricted)
  23. Zweimueller, Josef & Brunner, Johann K., 1996. "Heterogeneous Consumers, Vertical Product Differentiation and the Rate of Innovation," Economics Series 32, Institute for Advanced Studies. [Downloadable!]
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Reto Foellmi und Josef Zweimüller, . "Inequality and Economic Growth - European Versus U.S. Experiences," IEW - Working Papers iewwp158, Institute for Empirical Research in Economics - IEW. [Downloadable!]
    Other versions:
  2. Foellmi, Reto & Zweimüller, Josef, 2005. "Income Distribution and Demand-Induced Innovations," CEPR Discussion Papers 4985, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  3. Nico Voigtländer & Hans-Joachim Voth, 2006. "Why England? Demographic factors, structural change and physical capital accumulation during the Industrial Revolution," DEGIT Conference Papers c011_003, DEGIT, Dynamics, Economic Growth, and International Trade. [Downloadable!]
    Other versions:
  4. Shen, Ling, 2005. "Inequality and growth: A joint analysis of demand and supply," Proceedings of the German Development Economics Conference, Kiel 2005 30, Verein für Socialpolitik, Research Committee Development Economics. [Downloadable!]
  5. Reto Foellmi & Josef Zweimueller, . "Inequality, Market Power, and Product Diversity," IEW - Working Papers iewwp145, Institute for Empirical Research in Economics - IEW. [Downloadable!]
    Other versions:
  6. Volker Grossmann, 2004. "Risky Human Capital Investment, Income Distribution, and Macroeconomic Dynamics," DEGIT Conference Papers c009_028, DEGIT, Dynamics, Economic Growth, and International Trade. [Downloadable!]
    Other versions:
  7. Guillaume Daudin, 2007. "Domestic Trade and Market Size in Late Eighteen Century France," Documents de Travail de l'OFCE 2007-35, Observatoire Francais des Conjonctures Economiques (OFCE). [Downloadable!]
    Other versions:
  8. Chu, Angus C., 2009. "Effects of Patent Policy on Income and Consumption Inequality in an R&D-Growth Model," MPRA Paper 10168, University Library of Munich, Germany. [Downloadable!]
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This page was last updated on 2009-11-19.

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