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

PDF
MPRA_paper_7856.pdf Download (420kB)  Preview 
Abstract
I empirically investigate the nonlinear 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 crosscountry inequality data sets, I find support for an inverted Ushaped relationship between inequality and innovative activities. This result is robust to two common inequality definitions and several parametric and nonparametric estimation procedures.
Item Type:  MPRA Paper 

Original Title:  An Empirical Analysis of the Relationship Between Inequality and Innovation in a Schumpeterian Framework 
Language:  English 
Keywords:  inequality, innovation, patents 
Subjects:  O  Economic Development, Innovation, Technological Change, and Growth > O1  Economic Development > O15  Human Resources ; Human Development ; Income Distribution ; Migration O  Economic Development, Innovation, Technological Change, and Growth > O3  Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights > O31  Innovation and Invention: Processes and Incentives 
Item ID:  7856 
Depositing User:  Ozan Hatipoglu 
Date Deposited:  21. Mar 2008 06:09 
Last Modified:  19. Mar 2015 00:18 
References:  Acemoglu, D., 1998. Why do technologies complement skills? Direct technical change and wage inequality. Quarterly Journal of Economics 113, 1055  1090. Acemoglu, D., 2002. Technical change, inequality and the labor market. Journal of Economic Literature XL, 712. Aghion,P., 2002. Schumpeterian growth theory and the dynamics of income inequality. Econometrica 70, 855882. Aghion, P., Howitt, P., 1992. A model of growth through creative destruction. Econometrica 60, 323 351. Aghion, P. , Howitt, P., Harris, C., Vickers, J., 2001. Competition, imitation and growth with stepbystep innovation. Review of Economic Studies 28, 46792. Aghion, P. , Bloom, N., Blundell, R., Griffith, R., Howitt, P., 2005. Competition and innovation: an inverted U relationship. Quarterly Journal of Economics 120, 701728. Aghion, P., Caroli, E., GarciaPenalosa (1999). Inequality and economic growth: the perspective of the new growth theories. Journal of Economic Literature 37, 161560. Ai, C. ,Chen, X., 2003. Efficient estimation of models with conditional moment restrictions containing unknown functions. Econometrica 71, 17951843. Allen, S., 2001. Technology and the wage structure. Journal of Labor Economics 19, 440483. Arellano, M., 2003. Panel Data Econometrics, Oxford University Press , New York. Arellano, M. and Bover,O., 1995. Another look at the instrumental variable estimation of errorcomponents models. Journal of Econometrics 68, 2951. Atkinson, A., 1997. Bringing income distribution from the cold. Economic Journal. 107, 297321. Atkinson, A., Brandolini, A., 2001. Promise and pitfalls in the use of secondary dataSets: income inequality in OECD countries as a case study. Journal of Economic Literature 34, 771799. Banerjee A. V., Duflo E., 2003. Inequality and growth: what can the data say? Journal of Economic Growth 8, 267299. Barro, R.,2000. Inequality and growth in a panel of countries. Journal of Economic Growth 5, 87120. Barro, R. J., and Lee, J. W., 1996. International measures of schooling years and schooling quality. American Economic Review 86, 21823. Barro, R. J., Lee, J.W., 1997. Data Set for a Panel of 138 Countries. Data set available on disk from authors. Baum, C. F., Schaffer, M.E., Stillman, S., 2003. Instrumental variables and GMM: estimation and testing. Stata Journal 3, 131. Benhabib, J., 2003. The tradeoff between inequality and growth. Annals of Economics and Finance 4, 329345. Blundell, R., Bond, S., 2000. GMM estimation with persistent panel data: an application to production functions. Econometric Reviews, 19, 32140. Blundell, R., Bond,S., 1998. Initial conditions and moment restrictions in dynamic panel data models. Journal of Econometrics 87,11543. Blundell, R., Bond, S., Windmeijer, F., 2000. Estimation in dynamic panel data models: improving on the performance of the standard GMM estimator, in: B. Baltagi (Ed.), Nonstationary Panels, Panel Cointegration, and Dynamic Panels, Advances in Econometrics, Vol. 15. JAI Press, Elsevier Science, Amsterdam, pp 5391. Brouwer, E., Kleinknecht, A.H., 1996. Determinants of Innovation: A MicroEconometric Analysis of Three Alternative Innovation Output Indicators" in A.H. Kleinknecht (Ed.),Determinants of Innovation: The Message from New Indicators, Macmillan Press, London, pp 99124. Carol, G., Hanan, T.M., 2000. The Demography of Organizations and Industries, Princeton University Press, Princeton N.Y. Chong, A., Zanforlin, L., 2002. Technology and epidemics. IMF Staff Papers 49, 426455. Deininger, K. and Squire, L. (1998)"New Ways Looking at Old Issues: Inequality and Growth," Journal of Development Economics, 57, 259  287. Doornik, J.A., Arellano, M. ,Bond, S., 2002. Panel data estimation using DPD for Ox. http://www.nuff.ox.ac.uk/Users/Doornik. Easterly, W., Levine,R.,1999. It's not factor accumulation: stylized facts and growth models. World Bank Economic Review, 15, 177219. Faria, L.A., 2002. Mergers and the market for organization capital. Working Paper, University of Chicago. Fellner, W. ,1951. The influence of market structure on technological progress. Quarterly Journal of Economics 65, 55677. Foellmi, R. and Zweimüller, J. (2006). 'Income distribution and demandinduced innovations', Review of Economic Studies, vol 73(4), pp. 941  960. Forbes, K. 2000. A reassessment of the relationship between inequality and growth. American Economic Review 90, 869887. Galbraith, J., Kum, H., 2003. Estimating the Inequality of Household Incomes: Filling Gaps and Fixing Problems in Deininger&Squire Data Set. UTIP Working Paper 22. Geroski, P.A., 1990. Innovation, technological opportunity, and market structure. Oxford Economic Papers 42, 586602. Geroski P.A., Walters, R., 1995. Innovative activity over business cycle. The Economic Journal 105, 91628. Griliches, Z. 1990"Patent Statistics as Economic Indicators: A Survey", Journal of Economic Literature, 28,16611707. Hausman, J.A. and Newey, W., 1995. Nonparametric estimation of exact consumers surplus and deadweight loss. Econometrica 63, 14451476. Heston, A., Summers, R., Aten, B., Penn World Table Version 6.2, Center for International Comparisons of Production, Income and Prices at the University of Pennsylvania, September 2006. Jovanovic B., Rousseau, P. 2001. Mergers and technological change, 18851998. Vanderbilt University Department of Economics Working Paper 01W16. Keller, W., 2001. International technology diffusion. NBER Working Paper 8573. Kuznets, S., 1955. Economic Growth and Income Inequality. American Economic Review 45, 128. Lach, S. 1995. "Patents and Productivity Growth at the Industry Level: A First Look", Economics Letters, 49, 101108 Levin, R., Reiss, P., 1984. Tests of a Schumpeterian model of R&D and market structure in: Z. Griliches (Ed.), R&D, Patents and Productivity, University of Chicago Press, Chicago, pp 175208 Murphy, K. M., Shleifer, A.,Vishny, R.1989. Income distribution, market size, and industrialization. Quarterly Journal of Economics 103, 537  564. Panizza, U., 2002. Income inequality and economic growth: evidence from American data"Journal of Economic Growth 7, 2541. Pavitt, K. 1985. "Patent Statistics as Indicators of Innovative Activities: Possibilities and Problems." Scientometrics 7, 7799. Piva ,M., Vivarelli, M. 2006. Is demandpulled innovation equally important in different groups of firms? Iza Discussion Papers 1982. Robinson, J., 1996. Rootn consistent semiparametric regressions. Econometrica 56 , 931954. Statistiques De Proprietre De Industrielle, 2000. World Intellectual Property Organization, CDROM. Sedgley, N. H., 2006. A Time Series Test of InnovationDriven Endogenous Growth. Economic Inquiry 44, 318332. UTIPUNIDO, University of Texas Inequality Project, http://utip.gov.utexas.edu. Windmeijer, F.,2000. A finite sample correction for the variance of linear twostep GMM estimators. Institute for Fiscal Studies, Working Paper 00/19. Weinhold, D. and NairReichert, U. 2006. Innovation, Inequality and Intellectual Property Rights. Working Paper. Zweimuller, Y., 2000. Schumpeterian entrepreneurs meet Engel's law: the impact of inequality on innovationdriven growth. Journal of Economic Growth 50, 185  206 
URI:  https://mpra.ub.unimuenchen.de/id/eprint/7856 