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

Journal
Journal of Evolutionary Economics : JEE
ISSN
0936-9937
ISSN-Digital
1432-1386
Type
journal article
Date Issued
2017
Author(s)
;
Zweimüller, Josef
DOI
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.
Language
English
HSG Classification
contribution to scientific community
HSG Profile Area
SEPS - Economic Policy
Refereed
Yes
Publisher
Springer
Publisher place
Berlin
Volume
27
Number
2
Start page
359
End page
378
URL
Subject(s)

economics

Division(s)

SIAW - Swiss Institut...

SEPS - School of Econ...

Eprints ID
234870
File(s)
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article_JEEC_print.pdf

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