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Schumpeterian Entrepreneurs Meet Engel's Law: The Impact of Inequality on Innovation-Driven Growth

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  • Josef Zweimueller

Abstract

This paper analyzes the impact of inequality on growth when technical progress is driven by innovations and consumers have hierarchic preferences. Inequality has an impact on growth because it affects the structure and the dynamics of demand. Redistribution from very rich to very poor consumers is beneficial for growth. In general, the growth effect depends on the nature of redistribution. Due to a demand externality of R&D activites multiple equilibria are possible.

Suggested Citation

  • Josef Zweimueller, "undated". "Schumpeterian Entrepreneurs Meet Engel's Law: The Impact of Inequality on Innovation-Driven Growth," IEW - Working Papers 009, Institute for Empirical Research in Economics - University of Zurich.
    • Handle: RePEc:zur:iewwpx:009
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    Cited by:

    1. Weinhold, Diana & Nair-Reichert, Usha, 2009. "Innovation, Inequality and Intellectual Property Rights," World Development, Elsevier, vol. 37(5), pages 889-901, May.
    2. Grossmann, Volker, 2008. "Risky human capital investment, income distribution, and macroeconomic dynamics," Journal of Macroeconomics, Elsevier, vol. 30(1), pages 19-42, March.
    3. Nico Voigtländer & Hans-Joachim Voth, 2006. "Why England? Demographic factors, structural change and physical capital accumulation during the Industrial Revolution," Journal of Economic Growth, Springer, vol. 11(4), pages 319-361, December.
    4. Murphy, Daniel P, 2011. "Does a Rising Tide Lift All Boats? Welfare Consequences of Asymmetric Growth," MPRA Paper 29407, University Library of Munich, Germany.
    5. repec:spo:wpecon:info:hdl:2441/b0ghejdpldro9c499h4ajc937 is not listed on IDEAS
    6. Shen, Ling, 2013. "How does wealth distribution affect firm's incentive to innovate better quality goods?," Economic Modelling, Elsevier, vol. 32(C), pages 516-523.
    7. Angus C. Chu, 2010. "Effects of Patent Policy on Income and Consumption Inequality in a R&D Growth Model," Southern Economic Journal, Southern Economic Association, vol. 77(2), pages 336-350, October.
    8. Guillaume Daudin, 2010. "Domestic Trade and Market Size in Late 18th century France," Sciences Po publications info:hdl:2441/b0ghejdpldr, Sciences Po.
    9. João Bernardino & Tanya Araújo, 2013. "On positional consumption and technological innovation: an agent-based model," Journal of Evolutionary Economics, Springer, vol. 23(5), pages 1047-1071, November.
    10. Ping Li & Guocai Yu, 2009. "The dynamics of China’s expenditure on R&D," Frontiers of Economics in China, Springer;Higher Education Press, vol. 4(1), pages 97-109, March.
    11. Chu, Angus C., 2012. "Global Poverty Reduction And Pareto-Improving Redistribution," Macroeconomic Dynamics, Cambridge University Press, vol. 16(04), pages 605-624, September.
    12. Bilancini Ennio & D'Alessandro Simone, 2008. "Functional Distribution, Land Ownership and Industrial Takeoff: The Role of Effective Demand," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 8(1), pages 1-36, August.
    13. Reto Foellmi und Josef Zweim�ller, "undated". "Inequality and Economic Growth - European Versus U.S. Experiences," IEW - Working Papers 158, Institute for Empirical Research in Economics - University of Zurich.
    14. Reto Foellmi & Josef Zweimuller, 2006. "Income Distribution and Demand-Induced Innovations," Review of Economic Studies, Oxford University Press, vol. 73(4), pages 941-960.
    15. Alcalá, Francisco, 2009. "Time, Quality and Growth," UMUFAE Economics Working Papers 4811, DIGITUM. Universidad de Murcia.
    16. Fusari, Angelo, 2014. "An Explanation of Economic Change and Development," MPRA Paper 60042, University Library of Munich, Germany, revised 2014.
    17. Daudin, Guillaume, 2010. "Domestic Trade and Market Size in Late-Eighteenth-Century France," The Journal of Economic History, Cambridge University Press, vol. 70(03), pages 716-743, September.
    18. Foellmi, Reto & Zweimuller, Josef, 2004. "Inequality, market power, and product diversity," Economics Letters, Elsevier, vol. 82(1), pages 139-145, January.
    19. Hélène LATZER, 2013. "Beyond the Arrow effect: income distribution and multi-quality firms in a Schumpeterian framework," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2013004, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    20. Raphael Anton Auer & Philip Ulrich Sauré, 2011. "Spatial Competition in Quality, Demand-Induced Innovation, and Schumpeterian Growth," Working Papers 2011-10, Swiss National Bank.
    21. Sirine Mnif, 2015. "Impact of Inequalities on Technological Changes: Case of the Developing Countries," International Journal of Academic Research in Business and Social Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Business and Social Sciences, vol. 5(3), pages 460-478, March.
    22. Kugler, Maurice, 2000. "International trade when inequality determines aggregate demand," Discussion Paper Series In Economics And Econometrics 0024, Economics Division, School of Social Sciences, University of Southampton.
    23. Hélène Latzer, 2011. "A Schumpeterian model of growth and inequality," Working Papers of BETA 2011-20, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
    24. Demmou, Lilas, 2012. "How product innovation in the North may immiserize the South," Journal of Development Economics, Elsevier, vol. 97(2), pages 293-304.

    More about this item

    Keywords

    innovation; growth; inequality; hierarchic demand; multiple equilibri;

    JEL classification:

    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies

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