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Induced Technical Change and Income Distribution: the Role of Public R&D and Labor Market Institutions

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  • Zamparelli, Luca

Abstract

This paper investigates the role of public R&D and labor market institutions in a labor constrained Classical growth model with induced technical change. It assumes that the innovation possibility frontier is a positive function of public R&D investment and a negative function of a measure of conflict in the labor market. It shows that while a larger size of the public sector and more peaceful industrial relations unequivocally boost long run growth, the effect on income distribution is not obvious. It depends on how the state of the labor market and public research affect the trade-off between labor and capital productivity growth, that is the slope of the innovation possibility frontier. While it appears plausible that a stronger workers' bargaining power may increase the wage share, higher public R&D investments will not affect income distribution unless it is biased toward either labor- or capital- saving innovations.

Suggested Citation

  • Zamparelli, Luca, 2021. "Induced Technical Change and Income Distribution: the Role of Public R&D and Labor Market Institutions," MPRA Paper 108431, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:108431
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    References listed on IDEAS

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    1. Shah, Anup & Desai, Meghnad, 1981. "Growth Cycles with Induced Technical Change," Economic Journal, Royal Economic Society, vol. 91(364), pages 1006-1010, December.
    2. Luke Petach & Daniele Tavani, 2020. "Income shares, secular stagnation and the long‐run distribution of wealth," Metroeconomica, Wiley Blackwell, vol. 71(1), pages 235-255, February.
    3. Emmanuel M. Drandakis & Edmond S. Phelps, 1965. "A Model of Induced Invention, Growth and Distribution," Cowles Foundation Discussion Papers 186, Cowles Foundation for Research in Economics, Yale University.
    4. A. J. Julius, 2005. "Steady‐State Growth And Distribution With An Endogenous Direction Of Technical Change," Metroeconomica, Wiley Blackwell, vol. 56(1), pages 101-125, February.
    5. Foley, Duncan K., 2003. "Endogenous technical change with externalities in a classical growth model," Journal of Economic Behavior & Organization, Elsevier, vol. 52(2), pages 167-189, October.
    6. C. C. von Weizsäcker, 1966. "Tentative Notes on a Two Sector Model with Induced Technical Progress," Review of Economic Studies, Oxford University Press, vol. 33(3), pages 245-251.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    induced innovation; public R&D; labor market institutions;
    All these keywords.

    JEL classification:

    • D33 - Microeconomics - - Distribution - - - Factor Income Distribution
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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