Innovation and Inequality

Introduction vii

Chapter 1: Which Tools Do We Need? 1

1.1 Production and Factor Prices 2

1.2 Factor Prices and Income Distribution 6

1.3 Factor Accumulation 11

1.4 Endogenous Technical Change 15

Chapter 2: Productivity and Wages in Neoclassical Growth Models 23

2.1 The Short Run 25

2.2 The Long Run 26

2.3 Conclusion 31

Chapter 3: Heterogeneous Labor 32

3.1 Skill-Biased Technical Progress 32

3.2 Capital-Skill Complementarity 35

3.3 Unbalanced Growth 38

3.4 Conclusion 41

Chapter 4: Competing Technologies 42

4.1 Learning the New Technology Is Costly 43

4.2 The New Technology Has Different Factor Intensities 52

4.3 Asymmetric Technical Progress 54

4.4 Conclusion 56

Chapter 5: Supply Effects 57

5.1 Supply Effects and Competing Technologies 58

5.2 Induced Bias in Innovation 72

5.3 Conclusion 84

Chapter 6: Labor as a Quality Input: Skill Aggregation and Sectoral Segregation 85

6.1 Bundling and Pricing of Labor Market Characteristics 86

6.2 Conclusion 98

Chapter 7: The Economics of Superstars 99

7.1 A Simple Model 100

7.2 Occupational Choice and Displacement 103

7.3 Growth and the Allocation of Talent 108

7.4 Hierarchy and Span of Control 109

7.5 Conclusion 116

Chapter 8: Complementarities and Segregation by Skills 117

8.1 A Simple Model 117

8.2 Application: Household Income Inequality and Assortative Mating 125

8.3 Extension: Increasing Firm Size and the Number of Worker Types in Segregated Equilibria 127

8.4 Aggregating Individual Interactions 131

8.5 Conclusion 148

8.6 Appendix 148

Chapter 9: Demand Effects 152

9.1 The Isoelastic Benchmark 153

9.2 Nonhomothetic Utility 154

9.3 The Limited Needs Property 155

9.4 Dynamics: Growth and the Introduction of New Varieties 158

9.5 An Application to Globalization 163

9.6 Asymmetries between Goods 165

9.7 Conclusion 171

9.8 Appendix 172

Chapter 10: Nonhomothetic Preferences and the Distributive Effects of Innovation and Intellectual Property 174

10.1 The Social Welfare Problem 175

10.2 Second-Best Analysis: The Role of Intellectual Property 179

10.3 Conclusion 182

10.4 Appendix: Derivation of (10.11) 183

Epilogue 184

References 187