Free DP Download 22 April 2022 - Inequality and Creative Destruction

Friday, April 22, 2022

Richard Blundell, Xavier Jaravel, Otto Toivanen CEPR Discussion Paper No. 16867 | January 2022

In this article, we review recent evidence showing how market forces and policies shape the rate and direction of innovation, with various implications for inequality. First, we characterize several market mechanisms whereby higher rates of innovation lead to higher inequality. Second, we highlight channels whereby inequality acts as an impediment to innovation and growth. Third, we highlight policies that can help achieve better outcomes for both innovation and inequality. We show that two types of policies, which are not traditionally viewed as part of innovation policy, play a key role to achieve the goal of enhancing innovation while reducing inequality: education and competition policy.

You can now listen to a podcast where Richard Blundell tells Tim Phillips about this research.