David Hemous, University of Zurich – Københavns Universitet

David Hemous, University of Zurich

"Innovation and Top Income Inequality"

Abstract

In this paper we use cross-state panel and cross US commuting-zone data to look at the relationship between innovation, top income inequality and social mobility. We find positive correlations between measures of innovation and top income inequality. We also show that the correlations between innovation and broad measures of inequality are not significant. Next, using instrumental variable analysis, we argue that these correlations at least partly reflect a causality from innovation to top income shares. Finally, we show that innovation, particularly by new entrants, is positively associated with social mobility, but less so in local areas with more intense lobbying activities.

(Joint: Philippe Aghion, Ufuk Akcigit, Antonin Bergeaud, Richard Blundell David Hémous)

Contact person: Morten Olsen