DP1888 Project Evaluation and Organizational Form
|Author(s):||Thomas Gehrig, Pierre Régibeau, Katharine Rockett|
|Publication Date:||May 1998|
|Keyword(s):||imperfect communication, Imperfect Information, organizational form|
|JEL(s):||D23, D83, L22|
|Programme Areas:||Industrial Organization|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=1888|
This paper analyses the impact of inequality on growth when technical progress is driven by innovations. It is assumed that consumers have hierarchic preferences. As a result inequality affects demand and therefore the incentive to innovate. Whether more inequality is harmful or beneficial for growth depends on the initial distribution. Complementarities between a technical and a pecuniary externality resulting from the innovation process may generate multiple equilibria. Redistribution may push an economy trapped in underdevelopment to a high-growth regime.