Innovation and Top Income Inequality

64 Pages Posted: 13 Jun 2015 Last revised: 29 Jul 2015

See all articles by Philippe Aghion

Philippe Aghion

College de France and London School of Economics and Political Science, Fellow; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Ufuk Akcigit

University of Chicago - Department of Economics; National Bureau of Economic Research (NBER); Center for Economic and Policy Research (CEPR)

Antonin Bergeaud

HEC Paris - Economics & Decision Sciences

Richard W. Blundell

UCL; Centre for Economic Policy Research (CEPR)

David Hémous

University of Zürich; Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 3 versions of this paper

Date Written: July 24, 2015

Abstract

In this paper we use cross-state panel data to show that top income inequality is (at least partly) driven by innovation. We first establish a positive and significant correlation between various measures of innovativeness and top income inequality in cross-state panel regressions. Two distinct instrumentation strategies suggest that this correlation (partly) reflects a causality from innovativeness to top income inequality, and the effect is significant: for example, when measured by the number of patent per capita, innovativeness accounts on average across US states for around 17% of the total increase in the top 1% income share between 1975 and 2010. Finally, we show that innovation does not increase broader measures of inequality which do not focus on top incomes, and that innovation is positively correlated with social mobility, but less so in states with more intense lobbying activities.

Keywords: Top Income, Inequality, Innovation, Patenting, Citations, Social Mobility, Incumbents, Entrant

JEL Classification: O30, O31, O33, O34, O40, O43, O47, D63, J14, J15

Suggested Citation

Aghion, Philippe and Akcigit, Ufuk and Bergeaud, Antonin and Blundell, Richard W. and Hemous, David, Innovation and Top Income Inequality (July 24, 2015). Banque de France Working Paper No. 557, INSEAD Working Paper No. 2015/50/EPS, Available at SSRN: https://ssrn.com/abstract=2617607 or http://dx.doi.org/10.2139/ssrn.2617607

Philippe Aghion

College de France and London School of Economics and Political Science, Fellow ( email )

London
United Kingdom

Centre for Economic Policy Research (CEPR)

London
United Kingdom

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Ufuk Akcigit

University of Chicago - Department of Economics ( email )

1126 E. 59th St
Chicago, IL 60637
United States

HOME PAGE: http://www.ufukakcigit.com

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Center for Economic and Policy Research (CEPR) ( email )

London
United Kingdom

Antonin Bergeaud (Contact Author)

HEC Paris - Economics & Decision Sciences ( email )

Paris
France

Richard W. Blundell

UCL ( email )

Department of Economics
Gower Street
London, WC1E 6BT
United Kingdom
+44 20 7504 5863 (Phone)
+44 20 7916 2773 (Fax)

HOME PAGE: http://www.ucl.ac.uk/~uctp39a/

Centre for Economic Policy Research (CEPR)

London
United Kingdom

David Hemous

University of Zürich ( email )

Zürich
Switzerland

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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