President's comments

Inequality and creative destruction

“…Growing markets make it worthwhile to pay the fixed costs necessary to innovate, reduce marginal costs, and enter new markets. The idea that higher market size leads to endogenous productivity gains goes back to the seminal work of Linder (1961) and Schmookler (1926). However, it is only recently that the literature has examined the implications of increasing returns and the market size channel for inequality.…”