IDEAS home Printed from https://ideas.repec.org/p/zur/iewwpx/009.html
   My bibliography  Save this paper

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

Author

Listed:
  • 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
    as

    Download full text from publisher

    File URL: http://www.econ.uzh.ch/static/wp_iew/iewwp009.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Bertola, Giuseppe, 1993. "Factor Shares and Savings in Endogenous Growth," American Economic Review, American Economic Association, vol. 83(5), pages 1184-1198, December.
    2. Alwyn Young, 1993. "Substitution and Complementarity in Endogenous Innovation," NBER Working Papers 4256, National Bureau of Economic Research, Inc.
    3. 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.
    4. Josef Zweimüller & Johann K. Brunner, 2005. "Innovation And Growth With Rich And Poor Consumers," Metroeconomica, Wiley Blackwell, vol. 56(2), pages 233-262, May.
    5. Alberto Alesina & Dani Rodrik, 1994. "Distributive Politics and Economic Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 109(2), pages 465-490.
    6. Paul Krugman, 1991. "History versus Expectations," The Quarterly Journal of Economics, Oxford University Press, vol. 106(2), pages 651-667.
    7. Murphy, Kevin M & Shleifer, Andrei & Vishny, Robert W, 1989. "Industrialization and the Big Push," Journal of Political Economy, University of Chicago Press, vol. 97(5), pages 1003-1026, October.
    8. 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.
    9. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth through Creative Destruction," Econometrica, Econometric Society, vol. 60(2), pages 323-351, March.
    10. Oded Galor & Joseph Zeira, 1993. "Income Distribution and Macroeconomics," Review of Economic Studies, Oxford University Press, vol. 60(1), pages 35-52.
    11. Deaton,Angus & Muellbauer,John, 1980. "Economics and Consumer Behavior," Cambridge Books, Cambridge University Press, number 9780521296762, Fall.
    12. Kevin M. Murphy & Andrei Shleifer & Robert Vishny, 1989. "Income Distribution, Market Size, and Industrialization," The Quarterly Journal of Economics, Oxford University Press, vol. 104(3), pages 537-564.
    13. Roland Bénabou, 1996. "Inequality and Growth," NBER Chapters,in: NBER Macroeconomics Annual 1996, Volume 11, pages 11-92 National Bureau of Economic Research, Inc.
    14. Persson, Torsten & Tabellini, Guido, 1994. "Is Inequality Harmful for Growth?," American Economic Review, American Economic Association, vol. 84(3), pages 600-621, June.
    15. Chou, Chien-Fu & Talmain, Gabriel, 1996. "Redistribution and Growth: Pareto Improvements," Journal of Economic Growth, Springer, vol. 1(4), pages 505-523, December.
    16. 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.
    17. 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.
    18. Kiminori Matsuyama, 1991. "Increasing Returns, Industrialization, and Indeterminacy of Equilibrium," The Quarterly Journal of Economics, Oxford University Press, vol. 106(2), pages 617-650.
    19. Robert J. Barro, 1999. "Inequality, Growth, and Investment," NBER Working Papers 7038, National Bureau of Economic Research, Inc.
    20. 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.
    21. repec:ubc:bricol:96-03 is not listed on IDEAS
    22. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 71-102, October.
    23. Chol-Won Li., "undated". "Inequality and Growth: A Schumpeterian Perspective," Working Papers 9609, Business School - Economics, University of Glasgow, revised Feb 1998.
    24. 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.
    25. Clarke, George R. G., 1995. "More evidence on income distribution and growth," Journal of Development Economics, Elsevier, vol. 47(2), pages 403-427, August.
    26. François Bourguignon, 1990. "Growth and Inequality in the Dual Model of Development: The Role of Demand Factors," Review of Economic Studies, Oxford University Press, vol. 57(2), pages 215-228.
    27. 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 701-717, August.
    28. Alwyn Young, 1993. "Substitution and Complementarity in Endogenous Innovation," The Quarterly Journal of Economics, Oxford University Press, vol. 108(3), pages 775-807.
    29. 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.
    30. Perotti, Roberto, 1996. "Growth, Income Distribution, and Democracy: What the Data Say," Journal of Economic Growth, Springer, vol. 1(2), pages 149-187, June.
    31. Zweimueller, Josef & Brunner, Johann K., 1996. "Heterogeneous Consumers, Vertical Product Differentiation and the Rate of Innovation," Economics Series 32, Institute for Advanced Studies.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Grossmann, Volker, 2008. "Risky human capital investment, income distribution, and macroeconomic dynamics," Journal of Macroeconomics, Elsevier, vol. 30(1), pages 19-42, March.
    2. repec:spo:wpecon:info:hdl:2441/b0ghejdpldro9c499h4ajc937 is not listed on IDEAS
    3. Guillaume Daudin, 2010. "Domestic Trade and Market Size in Late 18th century France," Sciences Po publications info:hdl:2441/b0ghejdpldr, Sciences Po.
    4. 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.
    5. 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.
    6. Foellmi, Reto & Zweimuller, Josef, 2004. "Inequality, market power, and product diversity," Economics Letters, Elsevier, vol. 82(1), pages 139-145, January.
    7. Helene LATZER, 2010. "Income inequalities and innovation by incumbents," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2010002, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    8. 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.
    9. 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.
    10. 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.
    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. Weinhold, Diana & Nair-Reichert, Usha, 2009. "Innovation, Inequality and Intellectual Property Rights," World Development, Elsevier, vol. 37(5), pages 889-901, May.
    13. Guillaume Daudin, 2008. "Domestic Trade and Market Size in Late Eighteenth-Century France," Oxford University Economic and Social History Series _069, University of Oxford, Department of Economics.
    14. Raphael Auer & Philip Sauré, 2011. "Spatial Competition in Quality, Demand-Induced Innovation, and Schumpeterian Growth," Working Papers 11.04, Swiss National Bank, Study Center Gerzensee.
    15. Demmou, Lilas, 2012. "How product innovation in the North may immiserize the South," Journal of Development Economics, Elsevier, vol. 97(2), pages 293-304.
    16. 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.
    17. Murphy, Daniel P, 2011. "Does a Rising Tide Lift All Boats? Welfare Consequences of Asymmetric Growth," MPRA Paper 29407, University Library of Munich, Germany.
    18. 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.
    19. 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.
    20. 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.
    21. Reto Foellmi & Josef Zweimuller, 2006. "Income Distribution and Demand-Induced Innovations," Review of Economic Studies, Oxford University Press, vol. 73(4), pages 941-960.
    22. Alcalá, Francisco, 2009. "Time, Quality and Growth," UMUFAE Economics Working Papers 4811, DIGITUM. Universidad de Murcia.
    23. Fusari, Angelo, 2014. "An Explanation of Economic Change and Development," MPRA Paper 60042, University Library of Munich, Germany, revised 2014.
    24. 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.

    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

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:zur:iewwpx:009. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Marita Kieser). General contact details of provider: http://edirc.repec.org/data/seizhch.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.