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Testing Schumpeterian growth theory: the role of income inequality as a determinant of research and development expenditures (developed economies) and successful technology transfers (developing economies)

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  • Marasco, Antonio

Abstract

This paper tests a strand of Schumpeterian growth theory that predicts a role for income inequality as a determinant of technology-enhancing activities, in the shape of innovation in the North and of technology transfers in the South. The analysis is conducted at three different levels: by world region, by industrial sector and by country. While the analysis by world region does not produce any clear cut evidence, the analysis by sector yields some evidence that income inequality in the South may have a positive effect on research and development (RnD) expenditures in some industrial sectors located in the North, such as non electricals and pharmaceuticals. Income inequality in both world regions seems also to play a role on the amount of technology that is transferred to the developing world. The sign of the effect might be positive for some sectors and negative for others, but the overall impact is probably negative in the case of Northern income inequality and positive with respect to Southern income inequality. However, the strongest evidence came from the cross-country analysis. We found that for each of the 15 OECD countries, foreign income inequality in the countries that trade the most with them, had a positive effect on the research and development expenditure carried out in those 15 countries. Such evidence appeared robust to whether we introduced control variables or not, and to several ways of measuring the dependent variable and the independent variables concerned. The cross-country analysis also yielded some evidence of a positive effect of both domestic and foreign (mainly developed world) income inequality on the level of technology transfers to developing countries.

Suggested Citation

  • Marasco, Antonio, 2005. "Testing Schumpeterian growth theory: the role of income inequality as a determinant of research and development expenditures (developed economies) and successful technology transfers (developing econo," MPRA Paper 4785, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:4785
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    References listed on IDEAS

    as
    1. Philippe Aghion & Nick Bloom & Richard Blundell & Rachel Griffith & Peter Howitt, 2005. "Competition and Innovation: an Inverted-U Relationship," The Quarterly Journal of Economics, Oxford University Press, vol. 120(2), pages 701-728.
    2. Rachel Griffith & Stephen Redding & John Van Reenen, 2004. "Mapping the Two Faces of R&D: Productivity Growth in a Panel of OECD Industries," The Review of Economics and Statistics, MIT Press, vol. 86(4), pages 883-895, November.
    3. Oded Galor & Omer Moav, 2004. "From Physical to Human Capital Accumulation: Inequality and the Process of Development," Review of Economic Studies, Oxford University Press, vol. 71(4), pages 1001-1026.
    4. Deininger, Klaus & Squire, Lyn, 1996. "A New Data Set Measuring Income Inequality," World Bank Economic Review, World Bank Group, vol. 10(3), pages 565-591, September.
    5. Dominique Guellec & Bruno van Pottelsberghe de la Potterie, 2003. "R&D and Productivity Growth: Panel Data Analysis of 16 OECD Countries," OECD Economic Studies, OECD Publishing, vol. 2001(2), pages 103-126.
    6. Josef Zweimüller & Johann K. Brunner, 2005. "Innovation And Growth With Rich And Poor Consumers," Metroeconomica, Wiley Blackwell, vol. 56(2), pages 233-262, May.
    7. Xavier Sala-i-Martin, 2002. "The World Distribution of Income (estimated from Individual Country Distributions)," NBER Working Papers 8933, National Bureau of Economic Research, Inc.
    8. Mani, Sunil, 2000. "Exports of High Technology Products from Developing Countries: Is it Real or a Statistical Artifact?," UNU-INTECH Discussion Paper Series 1, United Nations University - INTECH.
    9. Marasco, Antonio, 2002. "An endogenous growth model with quality ladders and consumers’ heterogeneity," MPRA Paper 5389, University Library of Munich, Germany, revised Jan 2007.
    10. Xavier Sala-i-Martin, 2001. "The disturbing 'rise' of global income inequality," Economics Working Papers 616, Department of Economics and Business, Universitat Pompeu Fabra, revised Apr 2002.
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    More about this item

    Keywords

    Innovation; RnD Expenditures; Technology Transfers; High Tech Exports; Income Inequality;

    JEL classification:

    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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