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

Banque de France

Richard W. Blundell

UCL; IFS; IZA Institute of Labor Economics; Centre for Economic Policy Research (CEPR)

David Hémous

University of Zürich

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)

Banque de France ( 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/

IFS

7 Ridgmount Street
London, WC1E 7AE
United Kingdom

HOME PAGE: http://www.ifs.org.uk

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Centre for Economic Policy Research (CEPR)

London
United Kingdom

David Hemous

University of Zürich ( email )

Zürich
Switzerland

Register to save articles to
your library

Register

Paper statistics

Downloads
127
Abstract Views
1,129
rank
192,415
PlumX Metrics