Income Distribution and Demand-Induced Innovations

Foellmi, Reto; Zweimüller, Josef

doi:10.2139/ssrn.625101

Cited by 79 publications

(119 citation statements)

References 96 publications

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“…In particular, our model nests the two models, i.e. it collapses to Foellmi and Zweimüller (2006) with no consumption hierarchy in the case of no trade costs and integrated factor markets, and to Foellmi et al (2010) in the case where the time horizon becomes arbitrarily small (i.e. there is only "one" time period).…”

Section: Introductionmentioning

confidence: 73%

“…there is no consumption hierarchy. A consumption hierarchy could be incorporated in the utility function by introducing a weighting function ξ(j), which is decreasing in the index j (see Foellmi and Zweimüller, 2006). This would imply that the marginal utility from consuming good j is higher than from consuming good k, where j < k. Hence, households would first purchase low-indexed goods and as their incomes grow move on to higher-indexed goods.…”

Section: Preferencesmentioning

confidence: 99%

“…On the other hand, there are dynamic models that analyze how the demand side shapes the incentives to innovate in closed economies like Foellmi and Zweimüller (2006).…”

Section: Introductionmentioning

confidence: 99%

“…Our model combines the static international setup from Foellmi et al (2010) with the dynamic structure of Foellmi and Zweimüller (2006). In particular, our model nests the two models, i.e.…”

Section: Introductionmentioning

confidence: 99%

“…Additionally, our model enables us to discuss how trade policy, intellectual property rights in a global context, and the form of international knowledge spillovers affect the incentives to innovate. Issues on which the models by Foellmi et al (2010) and Foellmi and Zweimüller (2006) are necessarily silent.…”

Section: Introductionmentioning

confidence: 99%

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Trade and Growth in an Unequal Global Economy

Köhler

2012

SSRN Journal

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This paper studies the patterns of trade and the incentives to innovate in an unequal global economy. We introduce non-homothetic preferences in a general-equilibrium model of endogenous growth and international trade between two countries, and argue that the effects of market integration on the consequent trade patterns and the incentives to innovate depend on the degree of income inequality across countries. We find that if inequality across countries is low, the extensive margin of trade between countries is high whereas the world growth rate is low. The introduction of non-homothetic preferences rises a number of interesting questions that are not an issue in the standard model. For example, we discuss the design of intellectual property rights, in particular national vs. international exhaustion of patents, and argue that households in poor and rich countries might not see eye to eye depending on how poor households weigh future losses in consumption against present gains. Furthermore, we address the welfare consequences of a trade liberalization, and show that households in the poor country might loose relative to households in the rich country if trade costs fall from a high to a sufficiently low level.JEL classification: D30, O30, F10

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Section: Introductionmentioning

confidence: 73%

Section: Preferencesmentioning

confidence: 99%

“…On the other hand, there are dynamic models that analyze how the demand side shapes the incentives to innovate in closed economies like Foellmi and Zweimüller (2006).…”

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Trade and Growth in an Unequal Global Economy

Köhler

2012

SSRN Journal

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Is inequality harmful for innovation and growth? Price versus market size effects

Foellmi

Zweimüller

2016

J Evol Econ

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We introduce non-homothetic preferences into an R&D based growth model to study how demand forces shape the impact of inequality on innovation and growth. Inequality affects the incentive to innovate via a price effect and a market size effect. When innovators have a large productivity advantage over traditional producers a higher extent of inequality tends to increase innovators' prices and markups. When this productivity gap is small, however, a redistribution from the rich to the poor increases market sizes and speeds up growth.

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Vertical differentiation and trade among symmetric countries

Picard

Tampieri

2020

Econ Theory

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We study a trade model with vertical product differentiation with many goods that are heterogeneous in cost and quality and produced in two quality versions. We discuss the composition of high-and low-quality goods in the workers' consumption baskets in countries between comparable countries. We show that a larger country population fosters its specialization in high-quality production while a higher country productivity leads to specialization in high quality production for all countries. Smaller trade costs foster specialization in high quality exports. We then discuss the effect of population heterogeneity on the consumption baskets and country specialization. Most of those results agree with existing empirical findings.

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Income Distribution and Demand-Induced Innovations

Cited by 79 publications

References 96 publications

Trade and Growth in an Unequal Global Economy

Trade and Growth in an Unequal Global Economy

Is inequality harmful for innovation and growth? Price versus market size effects

Vertical differentiation and trade among symmetric countries

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