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

  • Zweimuller, Josef

This article analyzes the impact of inequality on growth when consumers have hierarchic preferences and technical progress is driven by innovations. With hierarchic preferences, the poor consume predominantly basic goods, whereas the rich consume also luxury goods. Inequality has an impact on growth because it affects the level and the dynamics of an innovator's demand. It is shown that redistribution from very rich to very poor consumers can be beneficial for growth. In general, the growth effect depends on the nature of redistribution. Due to a demand externality from R&D activities, multiple equilibria are possible. Copyright 2000 by Kluwer Academic Publishers

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Article provided by Springer in its journal Journal of Economic Growth.

Volume (Year): 5 (2000)
Issue (Month): 2 (June)
Pages: 185-206

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Handle: RePEc:kap:jecgro:v:5:y:2000:i:2:p:185-206
Contact details of provider: Web page: http://www.springerlink.com/link.asp?id=102931

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  1. Young, Alwyn, 1993. "Substitution and Complementarity in Endogenous Innovation," The Quarterly Journal of Economics, MIT Press, vol. 108(3), pages 775-807, August.
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  19. repec:ubc:bricol:96-03 is not listed on IDEAS
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  27. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth Through Creative Destruction," Scholarly Articles 12490578, Harvard University Department of Economics.
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  29. Chol-Won Li., . "Inequality and Growth: A Schumpeterian Perspective," Working Papers 9609, Business School - Economics, University of Glasgow, revised Feb 1998.
  30. 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.
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