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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. 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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  7. Rodrik, Dani & Alesina, Alberto, 1994. "Distributive Politics and Economic Growth," Scholarly Articles 4551798, Harvard University Department of Economics.
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  9. Zweimueller, Josef & Brunner, Johann K., 1996. "Heterogeneous Consumers, Vertical Product Differentiation and the Rate of Innovation," Economics Series 32, Institute for Advanced Studies.
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  21. repec:ubc:bricol:96-03 is not listed on IDEAS
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  27. Alwyn Young, 1993. "Substitution and Complementarity in Endogenous Innovation," The Quarterly Journal of Economics, Oxford University Press, vol. 108(3), pages 775-807.
  28. 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.
  29. François Bourguignon, 1990. "Growth and Inequality in the Dual Model of Development: The Role of Demand Factors," Review of Economic Studies, Oxford University Press, vol. 57(2), pages 215-228.
  30. Baland, Jean-Marie & Ray, Debraj, 1991. "Why does asset inequality affect unemployment? A study of the demand composition problem," Journal of Development Economics, Elsevier, vol. 35(1), pages 69-92, January.
  31. Falkinger, Josef, 1994. "An Engelian model of growth and innovation with hierarchic consumer demand and unequal incomes," Ricerche Economiche, Elsevier, vol. 48(2), pages 123-139, June.
  32. Chou, Chien-Fu & Talmain, Gabriel, 1996. "Redistribution and Growth: Pareto Improvements," Journal of Economic Growth, Springer, vol. 1(4), pages 505-23, December.
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