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Schumpeterian Growth Theory and the Dynamics of Income Inequality

  • Philippe Aghion
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    In this lecture, it is argued that Schumpeterian Growth Theory, in which growth is driven by a sequence of quality-improving innovations, can shed light on two important puzzles raised by the recent evolution of wage inequality in developed economies. The first puzzle concerns wage inequality "between" educational groups, which has substantially risen in the US and the UK during the past two decades following a sharp increase in the supply of educated labor. The second puzzle concerns wage inequality "within" educational groups, which accounts for a large fraction of the observed increase in wage inequality, although in contrast to between-group wage inequality it has mainly affected the "temporary" component of income. Copyright The Econometric Society 2002.

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    Article provided by Econometric Society in its journal Econometrica.

    Volume (Year): 70 (2002)
    Issue (Month): 3 (May)
    Pages: 855-882

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    Handle: RePEc:ecm:emetrp:v:70:y:2002:i:3:p:855-882
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    1. Stephen Machin & John Van Reenen, 1998. "Technology And Changes In Skill Structure: Evidence From Seven Oecd Countries," The Quarterly Journal of Economics, MIT Press, vol. 113(4), pages 1215-1244, November.
    2. Robert J. Barro, 2012. "Inflation and Economic Growth," CEMA Working Papers 568, China Economics and Management Academy, Central University of Finance and Economics.
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    5. James J. Heckman & Lance Lochner & Christopher Taber, 1998. "Explaining Rising Wage Inequality: Explorations with a Dynamic General Equilibrium Model of Labor Earnings with Heterogeneous Agents," NBER Working Papers 6384, National Bureau of Economic Research, Inc.
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    8. Machin, Stephen, 1996. "Wage Inequality in the UK," Oxford Review of Economic Policy, Oxford University Press, vol. 12(1), pages 47-64, Spring.
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    10. Cecilia Garcia-Penalosa & Eve Caroli & Philippe Aghion, 1999. "Inequality and Economic Growth: The Perspective of the New Growth Theories," Journal of Economic Literature, American Economic Association, vol. 37(4), pages 1615-1660, December.
    11. Nicole M. Fortin & Thomas Lemieux, 1997. "Institutional Changes and Rising Wage Inequality: Is There a Linkage?," Journal of Economic Perspectives, American Economic Association, vol. 11(2), pages 75-96, Spring.
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    13. Oded Galor & Omer Moav, 1998. "Ability Biased Technological Transition, Wage Inequality, and Economic Growth," Working Papers 98-14, Brown University, Department of Economics.
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