"Returns to Innovation and Income Inequality: A Centenary Perspective" by Francesco Venturini

Unpublished Paper

Returns to Innovation and Income Inequality: A Centenary Perspective

SSRN (2022)

Francesco Venturini, University of Perugia

Link

Abstract

This paper investigates the role of research productivity in explaining the evolution of income inequality in the last one hundred years. We develop a Schumpeterian growth model featuring an endogenous income distribution, which predicts that innovation impacts income inequality with two counteracting forces, a positive one associated with the increase in asset returns and a negative one related to the dissipation of innovation rents due to creative destruction. Using historical data for 21 OECD countries over the period 1920-2019, we estimate the long-run relationship between research productivity and income inequality and simulate the dynamic response of inequality to an institutional shock that facilitated international patenting and, hence, promoted the exploitation of innovation rents by firms. Our estimates reveal a strong, positive association between research productivity and income inequality, with the asset returns channel being the dominant mechanism of transmission.

Keywords

Income inequality; R&D productivity; Schumpeterian growth

Disciplines

Economics

Publication Date

Spring March 31, 2022

DOI

http://dx.doi.org/10.2139/ssrn.4071435

Citation Information

Francesco Venturini. "Returns to Innovation and Income Inequality: A Centenary Perspective" SSRN (2022)
Available at: http://works.bepress.com/francesco_venturini/69/