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Contribution Details

Type Working Paper
Scope Discipline-based scholarship
Title Innovation and Top Income Inequality
Organization Unit
  • Philippe Aghion
  • Ufuk Akcigit
  • Antonin Bergeaud
  • Richard Blundell
  • David Hémous
  • English
Institution University of Zurich
Series Name INSEAD Working Paper
Number 2015/50/E
Date 2015
Abstract Text 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.
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Keywords top income, inequality, innovation, patenting, citations, social mobility,, , incumbents, entrant.