Schumpeterian Entrepreneurs Meet Engel's Law: The Impact of Inequality on Innovation-Driven Growth

Josef Zweimüller ()

No 1880, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: This paper analyses the impact of inequality on growth when technical progress is driven by innovations. It is assumed that consumers have hierarchic preferences. As a result inequality affects demand and therefore the incentive to innovate. Whether more inequality is harmful or beneficial for growth depends on the initial distribution. Complementarities between a technical and a pecuniary externality resulting from the innovation process may generate multiple equilibria. Redistribution may push an economy trapped in underdevelopment to a high-growth regime.

Keywords: Growth; hierarchic demand; Inequality; Innovation (search for similar items in EconPapers)
JEL-codes: H23 O14 O15 O31 (search for similar items in EconPapers)
Date: 1998-05
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Citations: View citations in EconPapers (5)

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Journal Article: Schumpeterian Entrepreneurs Meet Engel's Law: The Impact of Inequality on Innovation-Driven Growth (2000)
Working Paper: Schumpeterian Entrepreneurs Meet Engel's Law: The Impact of Inequality on Innovation-Driven Growth
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