Innovation and Inequality from Stagnation to Growth

Chu, Angus C. and Peretto, Pietro (2019): Innovation and Inequality from Stagnation to Growth.

Abstract

This study explores the evolution of income inequality in an economy featuring an endogenous transition from stagnation to growth. We incorporate heterogenous households into a Schumpeterian model of endogenous takeoff. In the pre-industrial era, the economy is in stagnation, and income inequality is determined by an unequal distribution of land ownership and remains stationary. When takeoff occurs, the economy experiences innovation and economic growth. In this industrial era, income inequality gradually rises until the economy reaches the balanced growth path. Finally, we calibrate the model for a quantitative analysis and compare the simulation results to historical data in the UK.

• Item Type: MPRA Paper
• Language: English
• Keywords: income inequality; innovation; economic growth; endogenous takeoff
• Subjects: D - Microeconomics > D3 - Distribution; O - Economic Development, Innovation, Technological Change, and Growth > O3 - Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights; O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity

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