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

  • Josef Zweimueller

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.

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Paper provided by Institute for Empirical Research in Economics - University of Zurich in its series IEW - Working Papers with number 009.

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Handle: RePEc:zur:iewwpx:009
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  1. Romer, Paul M, 1987. "Growth Based on Increasing Returns Due to Specialization," American Economic Review, American Economic Association, vol. 77(2), pages 56-62, May.
  2. Murphy, Kevin M. & Shleifer, Andrei & Vishny, Robert W., 1989. "Industrialization and the Big Push," Scholarly Articles 3606235, Harvard University Department of Economics.
  3. Kiminori Matsuyama, 1990. "Increasing Returns, Industrialization and Indeterminacy of Equilibrium," Discussion Papers 878, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  4. Benabou, R., 1996. "Inequality and Growth," Working Papers 96-22, C.V. Starr Center for Applied Economics, New York University.
  5. Persson, T. & Tabellini, G., 1993. "Is Inequality Harmful for Growth," Papers 537, Stockholm - International Economic Studies.
  6. Aghion, P. & Howitt, P., 1989. "A Model Of Growth Through Creative Destruction," Working papers 527, Massachusetts Institute of Technology (MIT), Department of Economics.
  7. Murphy, Kevin M & Shleifer, Andrei & Vishny, Robert W, 1989. "Income Distribution, Market Size, and Industrialization," The Quarterly Journal of Economics, MIT Press, vol. 104(3), pages 537-64, August.
  8. Robert J. Barro, 1999. "Inequality, Growth, and Investment," NBER Working Papers 7038, National Bureau of Economic Research, Inc.
  9. Galor, Oded & Zeira, Joseph, 1993. "Income Distribution and Macroeconomics," Review of Economic Studies, Wiley Blackwell, vol. 60(1), pages 35-52, January.
  10. Perotti, Roberto, 1996. " Growth, Income Distribution, and Democracy: What the Data Say," Journal of Economic Growth, Springer, vol. 1(2), pages 149-87, June.
  11. repec:ubc:bricol:96-03 is not listed on IDEAS
  12. Deininger, Klaus & Squire, Lyn, 1998. "New ways of looking at old issues: inequality and growth," Journal of Development Economics, Elsevier, vol. 57(2), pages 259-287.
  13. repec:cup:cbooks:9780521296762 is not listed on IDEAS
  14. Falkinger, Josef, 1994. "An Engelian model of growth and innovation with hierarchic consumer demand and unequal incomes," Ricerche Economiche, Elsevier, vol. 48(2), pages 123-139, June.
  15. Bertola, Giuseppe, 1991. "Factor Shares and Savings In Endogenous Growth," CEPR Discussion Papers 576, C.E.P.R. Discussion Papers.
  16. Baland, Jean-Marie & Ray, Debraj, 1991. "Why does asset inequality affect unemployment? A study of the demand composition problem," Journal of Development Economics, Elsevier, vol. 35(1), pages 69-92, January.
  17. Paul M Romer, 1999. "Endogenous Technological Change," Levine's Working Paper Archive 2135, David K. Levine.
  18. Alesina, Alberto F & Rodrik, Dani, 1991. "Distributive Politics and Economic Growth," CEPR Discussion Papers 565, C.E.P.R. Discussion Papers.
  19. Stokey, Nancy L, 1988. "Learning by Doing and the Introduction of New Goods," Journal of Political Economy, University of Chicago Press, vol. 96(4), pages 701-17, August.
  20. Bourguignon, Francois, 1990. "Growth and Inequality in the Dual Model of Development: The Role of Demand Factors," Review of Economic Studies, Wiley Blackwell, vol. 57(2), pages 215-28, April.
  21. Young, Alwyn, 1993. "Substitution and Complementarity in Endogenous Innovation," The Quarterly Journal of Economics, MIT Press, vol. 108(3), pages 775-807, August.
  22. Chou, Chien-Fu & Talmain, Gabriel, 1996. " Redistribution and Growth: Pareto Improvements," Journal of Economic Growth, Springer, vol. 1(4), pages 505-23, December.
  23. Clarke, George R. G., 1995. "More evidence on income distribution and growth," Journal of Development Economics, Elsevier, vol. 47(2), pages 403-427, August.
  24. Eswaran, Mukesh & Kotwal, Ashok, 1993. "A theory of real wage growth in LDCs," Journal of Development Economics, Elsevier, vol. 42(2), pages 243-269, December.
  25. Alwyn Young, 1993. "Substitution and Complementarity in Endogenous Innovation," NBER Working Papers 4256, National Bureau of Economic Research, Inc.
  26. Zweimueller, Josef & Brunner, Johann K., 1996. "Heterogeneous Consumers, Vertical Product Differentiation and the Rate of Innovation," Economics Series 32, Institute for Advanced Studies.
  27. Matsuyama, Kiminori, 1992. "The market size, entrepreneurship, and the big push," Journal of the Japanese and International Economies, Elsevier, vol. 6(4), pages 347-364, December.
  28. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth Through Creative Destruction," Scholarly Articles 12490578, Harvard University Department of Economics.
  29. Falkinger, Josef & Zweimuller, Josef, 1996. "The cross-country Engel curve for product diversification," Structural Change and Economic Dynamics, Elsevier, vol. 7(1), pages 79-97, March.
  30. Josef Zweimüller & Johann K. Brunner, 2005. "Innovation And Growth With Rich And Poor Consumers," Metroeconomica, Wiley Blackwell, vol. 56(2), pages 233-262, 05.
  31. Krugman, Paul, 1991. "History versus Expectations," The Quarterly Journal of Economics, MIT Press, vol. 106(2), pages 651-67, May.
  32. Chol-Won Li., . "Inequality and Growth: A Schumpeterian Perspective," Working Papers 9609, Business School - Economics, University of Glasgow, revised Feb 1998.
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