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Wage inequality and induced innovation in a classical-Marxian growth model

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  • Marco Stamegna

    (Scuola Normale Superiore)

Abstract

The present paper works out a classical-Marxian growth model with an endogenous direction of technical change and a heterogeneous labour force, made up of high-skilled and low-skilled workers. It draws on the Kaleckian mark-up pricing to link wage inequality to the relative unit labour cost at the firm level; on growth cycle models à la Goodwin to formalize the dynamic interaction between labour market and distributive shares of income; on the induced innovation literature to link the bias of technical change to the firm’s choice of the optimal combination of factor-augmenting technologies. We find that, in contrast to the neoclassical literature on skill-biased technical change, the institutional framework that governs the distributional conflict is the ultimate determinant of both wage inequality and the direction of technical change. A decline in low-skilled workers’ bargaining strength or a rise in product market concentration led to both an increase in wage inequality and a bias of technical change favouring high-skilled over low-skilled labour productivity growth. As opposed to the Goodwin model with induced technical change and homogeneous labour force, labour market institutions thus affect steady-state income distribution, capital accumulation and labour productivity growth, and no necessary trade-off arises between labour market regulation and employment. Finally, if the steady-state value of wage inequality exceeds a critical value, an exogenous increase in the mark-up or in the high-skilled workers’ bargaining power allow both capitalists and high-skilled workers to increase their income shares at the expense of the low-skilled workers.

Suggested Citation

  • Marco Stamegna, 2024. "Wage inequality and induced innovation in a classical-Marxian growth model," Journal of Evolutionary Economics, Springer, vol. 34(1), pages 127-168, January.
  • Handle: RePEc:spr:joevec:v:34:y:2024:i:1:d:10.1007_s00191-024-00851-z
    DOI: 10.1007/s00191-024-00851-z
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    More about this item

    Keywords

    Wage inequality; Growth; Distribution; Endogenous technical change;
    All these keywords.

    JEL classification:

    • D33 - Microeconomics - - Distribution - - - Factor Income Distribution
    • E11 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Marxian; Sraffian; Kaleckian
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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