Wealth Inequality in the Long Run: A Schumpeterian Growth Perspective

2018 ◽  
Author(s):  
Jakob Madsen ◽  
Antonio Minniti ◽  
Francesco Venturini
Keyword(s):  
Wealth Inequality ◽  
Schumpeterian Growth ◽  
Long Run

Wealth Inequality in the Long Run: A Schumpeterian Growth Perspective

2020 ◽  
Author(s):  
Jakob B Madsen ◽  
Antonio Minniti ◽  
Francesco Venturini
Keyword(s):  
Capital Investment ◽  
Historical Data ◽  
Wealth Inequality ◽  
Growth Effect ◽  
Intangible Capital ◽  
Neoclassical Model ◽  
Schumpeterian Growth ◽  
Long Run ◽  
Tangible Assets ◽  
Income Ratio

Abstract This paper extends the analysis of the wealth–income ratio based on the neoclassical model in a Schumpeterian growth framework in which savings are channelled to both tangible and intangible capital investment. Using historical data for 21 OECD countries over the period 1860–2015, we find that the wealth–income ratio and, hence, wealth inequality, is negatively related to the rate of economic growth and positively related to the rates of investment in intangible and tangible assets, as predicted by the theory. Accounting for the innovation-induced counteracting growth effect on the wealth–income ratio, we show that the net effect of investment in intangibles on wealth inequality is positive. Our estimates suggest that intangibles have been a contributing factor in wealth inequality since 1860 and that the marked increase in the investment in intangible assets in the post–WWII period has been a significant driver of wealth inequality since the 1970s.

scholarly journals Effects of patents on the transition from stagnation to growth

2019 ◽  
Vol 33 (2) ◽  
pp. 395-411 ◽  
Author(s):  
Angus C. Chu ◽  
Zonglai Kou ◽  
Xilin Wang
Keyword(s):  
Economic Growth ◽  
Intellectual Property ◽  
Property Rights ◽  
Population Size ◽  
Intellectual Property Rights ◽  
Growth Model ◽  
Patent Protection ◽  
Theoretic Analysis ◽  
Schumpeterian Growth ◽  
Long Run

Abstract This study provides a growth-theoretic analysis of the effects of intellectual property rights on the take-off of an economy from an era of stagnation to a state of sustained economic growth. We incorporate patent protection into a Schumpeterian growth model in which take-off occurs when the population size crosses an endogenous threshold. We find that strengthening patent protection has contrasting effects on economic growth at different stages of development. Specifically, it leads to an earlier take-off but also reduces economic growth in the long run.

scholarly journals ENDOGENOUS BORROWING CONSTRAINTS AND WEALTH INEQUALITY

2016 ◽  
Vol 20 (6) ◽  
pp. 1413-1431 ◽  
Author(s):  
Joydeep Bhattacharya ◽  
Xue Qiao ◽  
Min Wang
Keyword(s):  
Steady State ◽  
Credit Market ◽  
Wealth Inequality ◽  
Borrowing Constraints ◽  
Initial Distribution ◽  
The Other ◽  
Capital Investments ◽  
Loan Default ◽  
Long Run ◽  
Human Capital Investments

This paper studies the evolution of wealth inequality in an economy with endogenous borrowing constraints. In the model economy, young agents need to borrow to finance human capital investments but cannot commit to repaying their loans. Creditors can punish defaulters by banishing them permanently from the credit market. At equilibrium, loan default is prevented by imposing a borrowing limit tied to the borrower's inheritance. The heterogeneity in inheritances translates into heterogeneity in borrowing limits: endogenously, some borrowers face a zero borrowing limit, and some are partly constrained, whereas others are unconstrained. Depending on the initial distribution of inheritances, it is possible that all lineages are attracted either to the zero-borrowing-limit steady state or to the unconstrained-borrowing steady state—long-run equality. It is also possible that some lineages end up in one steady state and the rest in the other—complete polarization.

Economic persistence despite adverse policies: Evidence from Kyrgyzstan

2021 ◽  
Author(s):  
Catherine Guirkinger ◽  
Gani Aldashev ◽  
Alisher Aldashev ◽  
Mate Fodor
Keyword(s):  
20Th Century ◽  
Wealth Inequality ◽  
Well Being ◽  
Early 20Th Century ◽  
Material Wealth ◽  
Long Run ◽  
Generational Transmission ◽  
Relative Status ◽  
Geographic Sorting ◽  
Economic Well Being

Abstract We study the long-run persistence of relative economic well-being under adverse government policies using a combination of historical and contemporaneous data from Kyrgyzstan. After controlling for unobservable local effects, the economic well-being of Kyrgyz households in the 2010s correlates with the early 20th-century average wealth of their tribes. Inequality at the tribe level in the 2010s correlates with wealth inequality in the early 20th century. The likely channels of persistence are the inter-generational transmission of human capital, relative status, political power, and cultural traits. Transmission of material wealth, differences in natural endowments, or geographic sorting cannot explain persistence.

scholarly journals Roman wealth and wealth inequality in comparative perspective

2020 ◽  
Vol 33 ◽  
pp. 341-353 ◽  
Author(s):  
Walter Scheidel
Keyword(s):  
Financial Crisis ◽  
Great Recession ◽  
Wealth Inequality ◽  
Barack Obama ◽  
Long Run ◽  
The World ◽  
Small Measure ◽  
The Media ◽  
Looking Back ◽  
Thomas Piketty

In 2013, Barack Obama called rising inequality “the defining challenge of our time”. Since the Financial Crisis and Great Recession of 2007-9, the gap between the haves and have-nots has attracted unprecedented attention in politics, the media and academia.1 Students of the more distant past have also begun to embrace this trend. Economists are once again looking back in time, inspired in no small measure by the broad impact of the work of Thomas Piketty.2 Historians are laboring hard to unearth and publish relevant data. Thanks to their efforts, we are now able to glimpse the contours of changes in the concentration of income and wealth over the very long run, at least in some parts of the world.3 Archaeologists have been joining the fray, gathering and analyzing plausible proxies of inequality such as house sizes.4

Long Run Wealth Inequality

2002 ◽  
Author(s):  
James Edward Curtis Jr
Keyword(s):  
Wealth Inequality ◽  
Long Run

scholarly journals About Capital in the Twenty-First Century

2015 ◽  
Vol 105 (5) ◽  
pp. 48-53 ◽  
Author(s):  
Thomas Piketty
Keyword(s):  
Optimal Taxation ◽  
Wealth Inequality ◽  
First Century ◽  
Capital Income ◽  
Long Run ◽  
Twenty First Century

In this article, I present three key facts about income and wealth inequality in the long run emerging from my book Capital in the Twenty-First Century and seek to sharpen and refocus the discussion about those trends. In particular, I clarify the role played by r > g in my analysis of wealth inequality. I also discuss some of the implications for optimal taxation, and the relation between capital-income ratios and capital shares.

scholarly journals HUMAN CAPITAL AND INNOVATION IN A MONETARY SCHUMPETERIAN GROWTH MODEL

2017 ◽  
Vol 23 (5) ◽  
pp. 1875-1894 ◽  
Author(s):  
Angus C. Chu ◽  
Lei Ning ◽  
Dongming Zhu
Keyword(s):  
Monetary Policy ◽  
Human Capital ◽  
Interest Rate ◽  
Growth Model ◽  
Growth Rates ◽  
Capital Accumulation ◽  
Nominal Interest Rate ◽  
Human Capital Accumulation ◽  
Schumpeterian Growth ◽  
Long Run

This study explores the growth and welfare effects of monetary policy in a scale-invariant Schumpeterian growth model with endogenous human capital accumulation. We model money demand via a cash-in-advance (CIA) constraint on research and development (R&D) investment. Our results can be summarized as follows. We find that an increase in the nominal interest rate leads to a decrease in R&D and human capital investment, which, in turn, reduces the long-run growth rates of technology and output. This result stands in stark contrast to the case of exogenous human capital accumulation in which the long-run growth rates of technology and output are independent of the nominal interest rate. Simulating the transitional dynamics, we find that the additional long-run growth effect under endogenous human capital accumulation amplifies the welfare effect of monetary policy. Decreasing the nominal interest rate from 10% to 0% leads to a welfare gain that is equivalent to a permanent increase in consumption of 2.82% (2.38%) under endogenous (exogenous) human capital accumulation.

TECHNOLOGY ADOPTION DURING THE PROCESS OF DEVELOPMENT: IMPLICATIONS FOR LONG-RUN PROSPECTS

2017 ◽  
Vol 23 (3) ◽  
pp. 907-942 ◽  
Author(s):  
Verónica Mies
Keyword(s):  
Technology Adoption ◽  
Growth Model ◽  
High Growth ◽  
Income Differences ◽  
Schumpeterian Growth ◽  
Developed Economies ◽  
Advanced Technologies ◽  
Long Run ◽  
Growth Equilibrium ◽  
Technology Level

Most papers studying the impacts of technology adoption on income trajectories assume that firms adopt frontier technologies when available. If these technologies are skill intensive, less-developed economies may fail in successfully implementing them and may become trapped in a low-growth equilibrium. Within a Schumpeterian growth model, we show that differences in adoption barriers and incentives to the accumulation of skills produce differences in the technology level that is optimal to adopt. If the economy is not overly distorted, copying nonfrontier technologies helps compensating for the scarcity of skills and increases the likelihood of copying frontier technologies in the long run. If distortions are significant, it may be optimal to copy less-advanced technologies even in the long run. If adoption is not a skill-intensive activity, then copying frontier technologies is always optimal; all economies achieve a high-growth equilibrium and only income differences persist in the long run.

Inflation, market structure, and innovation-driven growth with distinct cash constraints

2020 ◽  
Author(s):  
By Chien-Yu Huang ◽  
Juin-Jen Chang ◽  
Lei Ji
Keyword(s):  
Growth Rate ◽  
Monetary Policy ◽  
Numerical Analysis ◽  
Market Structure ◽  
Schumpeterian Growth ◽  
Long Run ◽  
Short Run ◽  
Endogenous Market Structure ◽  
The Relationship ◽  
D Investment

Abstract This article explores the effects of monetary policy (inflation) in a Schumpeterian growth model with an endogenous market structure and distinct cash (or cash-in-advance, CIA) constraints on consumption, production, and two types of R&D investment—quality-improving and variety-expanding R&D. We show that the relationship between inflation and growth is negative if quality-improving R&D (incumbent) is subject to the CIA constraint, but positive if variety-expanding R&D (entrant) is subject to the CIA constraint. Inflation has no effect on growth as consumption or production is subject to the CIA constraint. In addition, the firm size may either increase or decrease in response to inflation depending on which type of R&D is constrained by cash. With all CIA constraints properly imposed, a likely scenario in our numerical analysis shows that a rise in inflation leads the growth rate to exhibit a decrease in the short run but an increase in the long run. Moreover, our welfare analysis shows that Friedman’s rule, in general, is not socially optimal.

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