Innovation and inequality in a monetary Schumpeterian model with heterogeneous households and firms

Abstract

This study develops a Schumpeterian growth model with heterogeneous households and heterogeneous …rms to explore the e¤ects of monetary policy on innovation and income inequality. Household heterogeneity arises from an unequal distribution of wealth. Firm heterogeneity arises from random quality improvements and a cost of entry. We …nd that under endogenous …rm entry, in ‡ation has inverted-U e¤ects on economic growth and income inequality. We also calibrate the model for a quantitative analysis and …nd that the model is able to match the growth-maximizing in ‡ation rate and the inequalitymaximizing in ‡ation rate that we estimate using crosscountry panel data.

Aid for Trade Flows and Wage Inequality in the Manufacturing Sector of Recipient-Countries

“…However, there is no consensus on the effect of inflation on income inequality. For example, Chu et al (2019) demonstrated the existence of an inverted-U-shape relationship between inflation and income inequality. However, Zheng…”

Money, Growth, and Welfare in a Schumpeterian Model with the Spirit of Capitalism

“…Finally, using (12) to replace w t l x,t and substituting 13, (14), and (16) into the previous equation to replace (1 + βi) w t l r,t , we get…”

“…It is worth noting that Sidrauski (1967) proves the superneutrality of money in a qualitatively equivalent approach which assumes money enters the utility function. 12 As explained by Sidrauski (1967, p. 544), "In the short run, an increase in the rate of monetary expansion is equivalent to a rise in government transfers to the private sector. It therefore results in an increase in consumption and a fall in the rate of capital accumulation."…”

Minimum Wages, Import Status, and Firms' Innovation: Theory and Evidence From China

“…While all of these early studies feature full employment, some subsequent studies use different approaches to incorporate equilibrium unemployment into the R&D‐based growth model 2 . A branch of this literature uses variants of the R&D‐based growth model to explore the effects of minimum wage on unemployment and innovation; see Askenazy (2003), Meckl (2004), Agenor and Lim (2018), Chu et al (2020), and Chu, Kou, and Wang (2020). This study contributes to this literature by showing that minimum wage has heterogeneous effects on innovation of different firms, and by testing these heterogeneous effects using firm‐level data.…”