Working Paper: NBER ID: w20502
Authors: Gene M. Grossman; Elhanan Helpman
Abstract: 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.
Keywords: growth; trade; inequality; innovation
JEL Codes: D33; F12; F16; O41
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| differences in technological parameters and policy choices across countries (O57) | variations in growth rates (O41) |
| differences in technological parameters and policy choices across countries (O57) | variations in income inequality (D31) |
| higher innovation capacity (O36) | faster growth (O49) |
| higher innovation capacity (O36) | increased income inequality (D31) |
| subsidies to research and development (R&D) (O38) | stimulate growth (O42) |
| subsidies to research and development (R&D) (O38) | raise inequality (I24) |
| better access to sophisticated technologies (O39) | greater income inequality at the lower end of the distribution (D31) |
| better access to sophisticated technologies (O39) | similar or lower inequality at the upper end (D31) |
| globalization and international trade (F69) | enhance growth rates across countries (O57) |
| globalization and international trade (F69) | contribute to higher income inequality (D31) |
| effects of R&D subsidies (O38) | amplify global disparities in income distribution (F61) |