Wealth inequality in the long run: A Schumpeterian growth perspective

Vol: 
35/2018
Author name: 
Madsen JB
Minniti A
Venturini F
Year: 
2018
Month: 
July
Abstract: 

This paper extends Piketty’s analysis of the wealth-income ratio used as a proxy for wealth inequality, to allow for innovation. Drawing on a Schumpeterian (R&D-based) growth model that incorporates both tangible and intangible capital and using historical data for 21 OECD countries, we find the wealth-income ratio to be significantly and positively related to R&D intensity and the fixed capital investment ratio, but negatively related to income growth. Accounting for the innovation-induced counteracting growth-effect on the wealth-income ratio, we show that the net effect of R&D on wealth inequality is positive.

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