IDEAS home Printed from https://ideas.repec.org/a/eee/ecmode/v164y2026ics0264999326003202.html

The cyclicality of income distribution and innovation induced growth

Author

Listed:
  • Alpanda, Sami
  • Aysun, Uluc

Abstract

This paper explains the countercyclicality of income inequality in the data by using a unique framework. Inferences are drawn from a model that combines a new Keynesian framework with an endogenous growth mechanism that features a labor-augmenting technology. The income disparity is between high-skill workers who service firms’ R&D activities and low-skill workers who contribute to output via a standard neoclassical function. Successful R&D activities increase firms’ knowledge stock that in turn augments low-skill workers’ efficiency and the trend growth rate of the economy. Both a reasonable calibration of the model and a Bayesian estimation exercise demonstrate that the share of high-skill workers’ income is countercyclical and that demand and price shocks are the drivers of this cyclicality. The reason is that the marginal product of high-skill workers is larger in magnitude and this renders the demand for their services less sensitive to shocks. In particular, firms require relatively smaller adjustments in this type of labor to match the changes in the demand for their goods. The disparity in demand for the two types of labor then implies that the high-skill/low-skill wage gap increases during recessions and decreases during expansions.

Suggested Citation

  • Alpanda, Sami & Aysun, Uluc, 2026. "The cyclicality of income distribution and innovation induced growth," Economic Modelling, Elsevier, vol. 164(C).
    • Handle: RePEc:eee:ecmode:v:164:y:2026:i:c:s0264999326003202
    DOI: 10.1016/j.econmod.2026.107791
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0264999326003202
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.econmod.2026.107791?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or

    for a different version of it.

    Other versions of this item:

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ecmode:v:164:y:2026:i:c:s0264999326003202. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/30411 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.