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

  • Zweimüller, Josef

This paper analyses the impact of inequality on growth when technical progress is driven by innovations. It is assumed that consumers have hierarchic preferences. As a result inequality affects demand and therefore the incentive to innovate. Whether more inequality is harmful or beneficial for growth depends on the initial distribution. Complementarities between a technical and a pecuniary externality resulting from the innovation process may generate multiple equilibria. Redistribution may push an economy trapped in underdevelopment to a high-growth regime.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 1880.

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Date of creation: May 1998
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Handle: RePEc:cpr:ceprdp:1880
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  1. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages S71-102, October.
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  7. Oded Galor & Joseph Zeira, 2013. "Income Distribution and Macroeconomics," Working Papers 2013-12, Brown University, Department of Economics.
  8. Alwyn Young, 1993. "Substitution and Complementarity in Endogenous Innovation," The Quarterly Journal of Economics, Oxford University Press, vol. 108(3), pages 775-807.
  9. Robert J. Barro, 1999. "Inequality, Growth, and Investment," NBER Working Papers 7038, National Bureau of Economic Research, Inc.
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  13. Bertola, Giuseppe, 1991. "Factor Shares and Savings In Endogenous Growth," CEPR Discussion Papers 576, C.E.P.R. Discussion Papers.
  14. Brunner, Johann K & Zweimüller, Josef, 1998. "Innovation and Growth with Rich and Poor Consumers," CEPR Discussion Papers 1855, C.E.P.R. Discussion Papers.
  15. 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.
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  28. repec:ubc:bricol:96-03 is not listed on IDEAS
  29. Eswaran, Mukesh & Kotwal, Ashok, 1993. "A theory of real wage growth in LDCs," Journal of Development Economics, Elsevier, vol. 42(2), pages 243-269, December.
  30. 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.
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  32. 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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