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An Empirical Analysis of the Relationship Between Inequality and Innovation in a Schumpeterian Framework

Hatipoglu, Ozan (2008): An Empirical Analysis of the Relationship Between Inequality and Innovation in a Schumpeterian Framework.

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Abstract

I empirically investigate the non-linear relationship between inequality and innovation in a Schumpeterian setup where growth is expressed by the rate of innovations. In this framework income distribution plays a role in determining the dynamic market sizes for innovators and therefore is a major determinant of growth. By using two new cross-country inequality data sets, I find support for an inverted U-shaped relationship between inequality and innovative activities. This result is robust to two common inequality definitions and several parametric and non-parametric estimation procedures.

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