A Schumpeterian Model of Top Income Inequality

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Top income inequality rose sharply in the United States over the last 40 years but increased only slightly in France and Japan. Why? We explore a model in which heterogeneous entrepreneurs, broadly interpreted, exert effort to generate exponential growth in their incomes, which tends to raise inequality. Creative destruction by outside innovators restrains this expansion and induces top incomes to obey a Pareto distribution. Economic forces that affect these two mechanisms—including information technology, taxes, and policies related to innovation blocking—may explain the varied patterns of top income inequality that we see in the data.
Publisher
UNIV CHICAGO PRESS
Issue Date
2018-10
Language
English
Article Type
Article
Keywords

COVARIANCE STRUCTURE; OPTIMAL TAXATION; POWER LAWS; ZIPFS LAW; GROWTH; DYNAMICS; EARNINGS; HETEROGENEITY; PARETO; ELASTICITIES

Citation

JOURNAL OF POLITICAL ECONOMY, v.126, no.5, pp.1785 - 1826

ISSN
0022-3808
DOI
10.3386/w20637
URI
http://hdl.handle.net/10203/246214
Appears in Collection
MG-Journal Papers(저널논문)
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