Why the Rich Should Like R&D Less
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 efforts: the higher the profit share of the individual's incomes the lower their ideal aggregate R&D and innovation. If rich shareholders were able to pursue their common interest and to discourage too much R&D compared, then 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%
|Date of creation:||Jun 2008|
|Date of revision:||Aug 2008|
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