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Why the rich should like R&D less

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  • 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%.

Suggested Citation

  • Guido Cozzi, 2008. "Why the rich should like R&D less," Working Papers 2008_18, Business School - Economics, University of Glasgow, revised Aug 2008.
    • Handle: RePEc:gla:glaewp:2008_18
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    References listed on IDEAS

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    More about this item

    Keywords

    R&D and Growth; Innovation; Inequality and Growth; Redistribution and Growth;
    All these keywords.

    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 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State
    • P48 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - Legal Institutions; Property Rights; Natural Resources; Energy; Environment; Regional Studies

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