DP10235 Growth, Trade, and Inequality
|Author(s):||Gene M. Grossman, Elhanan Helpman|
|Publication Date:||November 2014|
|Keyword(s):||endogenous growth, income distribution, income inequality, innovation, trade and growth|
|JEL(s):||D33, F12, F16, O41|
|Programme Areas:||International Macroeconomics, International Trade and Regional Economics|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=10235|
We introduce firm and worker heterogeneity into a model of innovation-driven endogenous growth. Individuals who differ in ability sort into either a research sector or a manufacturing sector that produces differentiated goods. Each research project generates a new variety of the differentiated product and a random technology for producing it. Technologies differ in complexity and productivity, and technological sophistication is complementary to worker ability. We study the co-determination of growth and income inequality in both the closed and open economy, as well as the spillover effects of policy and conditions in one country to outcomes in others.