Is inequality harmful for Innovation and Growth? Price versus Market Size Effects

Item Type Journal paper
Abstract We introduce non-homothetic preferences into an R&D based growth model to study how demand forces shape the impact of inequality on innovation and growth. Inequality affects the incentive to innovate via a price effect and a market size effect. When innovators have a large productivity advantage over traditional producers a higher extent of inequality tends to increase innovators’ prices and mark-ups. When this productivity gap is small, however, a redistribution from the rich to the poor increases market sizes and speeds up growth.
Authors Föllmi, Reto & Zweimüller, Josef
Journal or Publication Title Journal of Evolutionary Economics : JEE
Language English
Subjects economics
HSG Classification contribution to scientific community
HSG Profile Area SEPS - Economic Policy
Refereed Yes
Date 2017
Publisher Springer
Place of Publication Berlin
Volume 27
Number 2
Page Range 359-378
ISSN 0936-9937
ISSN-Digital 1432-1386
Publisher DOI https://doi.org/10.1007/s00191-016-0451-y
Depositing User Prof. Dr. Reto Föllmi
Date Deposited 23 Sep 2014 12:59
Last Modified 01 Jun 2018 13:59
URI: https://www.alexandria.unisg.ch/publications/234870

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Citation

Föllmi, Reto & Zweimüller, Josef (2017) Is inequality harmful for Innovation and Growth? Price versus Market Size Effects. Journal of Evolutionary Economics : JEE, 27 (2). 359-378. ISSN 0936-9937

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https://www.alexandria.unisg.ch/id/eprint/234870
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