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Growing income inequality due to biased technological change

Fernando Perera-Tallo

Journal of Macroeconomics, 2017, vol. 52, issue C, 23-38

Abstract: Inequality is rising in many countries. This paper presents a growth model in which technological change increases the income share of reproducible factors at the expense of non-reproducible ones. Agents are heterogeneous in wealth. Preferences imply that the saving rate increases with wealth. Consequently, assets (reproducible factor) are less equally distributed than raw labor (non-reproducible factor). This implies that technological change raises the share of the less equally distributed factor, increasing inequality along permanent growth path. When reproducible factors and the state of know-how are low, to adopt new technologies is not profitable, learning-by-doing and technological change ceases, arising stagnation.

Keywords: Growth theory; Technological change; Inequality; Poverty traps (search for similar items in EconPapers)
JEL-codes: D3 O1 (search for similar items in EconPapers)
Date: 2017
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DOI: 10.1016/j.jmacro.2017.02.002

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