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Income Distribution and Demand-induced Innovations


Foellmi, Reto; Zweimüller, Josef (2004). Income Distribution and Demand-induced Innovations. Working paper series / Institute for Empirical Research in Economics No. 212, University of Zurich.

Abstract

"We utilize Schmookler’s (1966) concept of demand-induced invention to study the rolenof income inequality in an endogenous growth model. As rich consumers can satisfy morenwants than poor consumers, both prices and market sizes for new products, as well as theirnevolution over time, are determined by the income distribution. We show how a change in the distribution of income affects the incentive to innovate and hence long-run growth. In general, less inequality tends to discourage the incentive to innovate, but this depends on the nature of the redistribution."

Abstract

"We utilize Schmookler’s (1966) concept of demand-induced invention to study the rolenof income inequality in an endogenous growth model. As rich consumers can satisfy morenwants than poor consumers, both prices and market sizes for new products, as well as theirnevolution over time, are determined by the income distribution. We show how a change in the distribution of income affects the incentive to innovate and hence long-run growth. In general, less inequality tends to discourage the incentive to innovate, but this depends on the nature of the redistribution."

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Additional indexing

Item Type:Working Paper
Communities & Collections:03 Faculty of Economics > Department of Economics
Working Paper Series > Institute for Empirical Research in Economics (former)
Dewey Decimal Classification:330 Economics
Language:English
Date:November 2004
Deposited On:29 Nov 2011 22:32
Last Modified:12 Aug 2017 12:56
Series Name:Working paper series / Institute for Empirical Research in Economics
ISSN:1424-0459
Official URL:http://www.econ.uzh.ch/wp.html

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