Declining research productivity and income inequality: A centenary perspective

Jakob Madsen (), Antonio Minniti and Francesco Venturini ()

Journal of Economic Dynamics and Control, 2024, vol. 167, issue C

Abstract: Research productivity has been sharply declining since 1920. This decline has significant implications for inequality. Using an open-economy Schumpeterian growth model, we show that domestic research productivity influences income inequality through two opposing forces: a positive effect from increased asset returns and a negative effect from the erosion of innovation rents through creative destruction. In contrast, foreign research productivity affects inequality solely through the asset returns channel. By constructing a long historical data series for 21 OECD countries, we find that the asset returns channel has been the dominant driver of inequality over the past century. The reduction in both domestic and foreign R&D productivity accounts for 25% to 35% of the observed downward trend in income inequality over this period.

Keywords: Income inequality; R&D productivity; Patents; Economic growth (search for similar items in EconPapers)
JEL-codes: D30 O30 O40 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:167:y:2024:i:c:s0165188924001167

DOI: 10.1016/j.jedc.2024.104924

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