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Innovation and Inequality from Stagnation to Growth

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  • Chu, Angus C.
  • Peretto, Pietro

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.

Suggested Citation

  • Chu, Angus C. & Peretto, Pietro, 2019. "Innovation and Inequality from Stagnation to Growth," MPRA Paper 96073, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:96073
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    Cited by:

    1. Chu, Angus C. & Fan, Haichao & Wang, Xilin, 2020. "Status-seeking culture and development of capitalism," Journal of Economic Behavior & Organization, Elsevier, vol. 180(C), pages 275-290.
    2. Chu, Angus C. & Peretto, Pietro F. & Wang, Xilin, 2022. "Agricultural revolution and industrialization," Journal of Development Economics, Elsevier, vol. 158(C).
    3. Ken Tabata, 2024. "Taxation of a Non-renewable Resource and Inequality in an R&D-based Growth Model," Discussion Paper Series 272, School of Economics, Kwansei Gakuin University.
    4. Chu, Angus C. & Liao, Chih-Hsing & Peretto, Pietro, 2024. "Dynamic effects of taxation in an unequal Schumpeterian economy," MPRA Paper 122219, University Library of Munich, Germany.

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    More about this item

    Keywords

    income inequality; innovation; economic growth; endogenous takeoff;
    All these keywords.

    JEL classification:

    • D3 - Microeconomics - - Distribution
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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