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Innovation and Top Income Inequality

Author

Listed:
  • Ufuk Akcigit

    (University of Pennsylvania)

  • Richard Blundell

    (University College London)

  • David Hemous

    (INSEAD)

  • Antonin Bergeaud

    (Banque de France and Ecole polytechnique)

  • Philippe Aghion

    (Harvard University)

Abstract

In this paper we use cross-state panel data to show a positive and significant correlation between innovativeness and top income inequality in the United States over the past decades. Our instrumentation at cross-state level suggests that this correlation (partly) reflects a causality from innovativeness to top income inequality. Next, using cross commuting zones (CZ) data, we show that innovativeness is positively and significantly correlated with social mobility, and that this correlation is driven mainly by entrant innovators and less so by incumbent innovators. In addition, the positive effects of innovation on the top 1% income share and on social mobility are both dampened in states with higher lobbying intensity. Overall, our findings are in line with the Schumpeterian view whereby the rise in top income shares in developed countries and particularly in the US over the past decades, is at least partly related to innovation-led growth, where innovation itself fosters social mobility at the top through the process of creative destruction.

Suggested Citation

  • Ufuk Akcigit & Richard Blundell & David Hemous & Antonin Bergeaud & Philippe Aghion, 2015. "Innovation and Top Income Inequality," 2015 Meeting Papers 1115, Society for Economic Dynamics.
  • Handle: RePEc:red:sed015:1115
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination
    • J15 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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