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Why the rich should like R&D less

Author Info

  • Guido Cozzi

Abstract

It is well known that research and development (R&D) is an important engine for economic growth. Also, initial wealth inequality and subsequent economic growth are well known to be related. This paper links inequality and R&D-driven growth. It shows that in a class of economies where R&D is the main engine for growth, different wealth groups differ in their desire for aggregate innovative effort: the richer the individual the lower her ideal aggregate R&D investment. In so far as rich shareholders are able to pursue their common interests in avoiding to invest too much in R&D compared to their ideal level, a pro-labour government able to impose distortionary progressive taxation, by minimizing the difference between the rich and the poor can maximize growth. Such predicted negative relationship between desired R&D and dynastic wealth is robust to any subsidy rate lower than 100%.

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Paper provided by Business School - Economics, University of Glasgow in its series Working Papers with number 2008_18.

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Date of creation: Jun 2008
Date of revision: Aug 2008
Handle: RePEc:gla:glaewp:2008_18
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Keywords: R&D and Growth; Innovation; Inequality and Growth; Redistribution and Growth;

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Find related papers by JEL classification:
  • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
  • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
  • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy
  • P16 - Economic Systems - - Capitalist Systems - - - Political Economy of Capitalism
  • P48 - Economic Systems - - Other Economic Systems - - - Political Economy; Legal Institutions; Property Rights; Natural Resources; Energy; Environment; Regional Studies

References listed on IDEAS
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  1. Perotti, Roberto, 1996. "Growth, Income Distribution, and Democracy: What the Data Say," Journal of Economic Growth, Springer, vol. 1(2), pages 149-87, June.
  2. Daron Acemoglu, 2007. "Introduction to Modern Economic Growth," Levine's Bibliography 122247000000001721, UCLA Department of Economics.
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  9. Cecilia García-Peñalosa & Jean-François Wen, 2008. "Redistribution and entrepreneurship with Schumpeterian growth," Journal of Economic Growth, Springer, vol. 13(1), pages 57-80, March.
  10. Guido Cozzi, 2005. "A Note on Progressive Taxation and Cooperation," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 7(5), pages 859-865, December.
  11. Peretto, Pietro F, 1998. "Technological Change and Population Growth," Journal of Economic Growth, Springer, vol. 3(4), pages 283-311, December.
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  14. Foellmi, Reto & Zweimüller, Josef, 2005. "Income Distribution and Demand-Induced Innovations," CEPR Discussion Papers 4985, C.E.P.R. Discussion Papers.
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