Wealth inequality in the long run: A Schumpeterian growth perspective

Icon of open book, ANU

This paper extends Piketty's analysis of the wealth-income ratio used as a proxy for
wealth inequality, to allow for innovation. Drawing on a Schumpeterian (R&D-based)
growth model that incorporates both tangible and intangible capital and using historical
data for 21 OECD countries, we find the wealth-income ratio to be significantly and
positively related to R&D intensity and the fixed capital investment ratio, but negatively
related to income growth. Accounting for the innovation-induced counteracting growtheffect
on the wealth-income ratio, we show that the net effect of R&D on wealth
inequality is positive.

Attachments