Why the Rich Should Like R&D Less

Guido Cozzi

Working Papers from Business School - Economics, University of Glasgow

Abstract: It is well known that research and development (R&D) is an important engine for economic growth. Also, initial wealth inequality and subsequent economic growth are well known to be related. This paper links inequality and R&D-driven growth. It shows that in a class of economies where R&D is the main engine for growth, different wealth groups differ in their desire for aggregate innovative efforts: the higher the profit share of the individual's incomes the lower their ideal aggregate R&D and innovation. If rich shareholders were able to pursue their common interest and to discourage too much R&D compared, then a pro-labour government able to impose distortionary progressive taxation, by minimizing the difference between the rich and the poor can maximize growth. Such predicted negative relationship between desired R&D and dynastic wealth is robust to any subsidy rate lower than 100%

Keywords: R&D and Growth; Social Preferences for Innovation; Inequality, Redistribution and Growth. (search for similar items in EconPapers)
JEL-codes: O31 O32 O38 P16 P48 (search for similar items in EconPapers)
Date: 2008-06, Revised 2009-03
New Economics Papers: this item is included in nep-ino and nep-mic
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Working Paper: Why the rich should like R&D less (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:gla:glaewp:2009_14

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