The empirical literature on the relationship between inequality and growth offers a contradictory assessment: Estimators based on time-series variation indicate a positive link while estimators (also) exploiting the cross-sectional variation suggest a negative relationship. The present paper (i)...

This paper provides new evidence on the relationship between innovation, competition and distance to the technology frontier, using enterprise surveys from 40 developing and transition countries. Different from previous empirical studies, the distance to frontier is measured by a firm's...

Many countries simultaneously suffer from high inflation, low growth and poorly developed financial sectors. In this paper, we integrate a microfounded model of money and finance into a model of endogenous growth to examine the effects of inflation on welfare, growth and the size of the...

We study a model of endogenous growth where firms invest both in product and process innovations. Product innovations (that open up completely new product lines) satisfy the advanced wants of the rich. Subsequent process innovations (that decrease costs per unit of quality) transform the...

Understanding the mechanism through which financial globalization affects economic performance is crucial for evaluating the costs and benefits of opening financial markets. This paper is a first attempt at disentangling the effects of financial integration on the two main determinants of...

In this paper we pursue an approach based on economic theory to illustrate possible shortcomings of widely-used detrending methods.We analyze a simple model of economic growth and business cycles in which investment and technical progress are stochastic.The Hodrick-Prescott and the Baxter-King...

Within the context of the neoclassical growth model I investigate the implications of (initial) endowment inequality when the rich have a higher marginal savings rate than the poor. More unequal societies grow faster in the transition process, and therefore exhibit a higher speed of convergence....

This paper analyzes the impact of inequality on growth when technical progress is driven by innovations and consumers have hierarchic preferences. Inequality has an impact on growth because it affects the structure and the dynamics of demand. Redistribution from very rich to very poor consumers...

We utilize Schmookler’s (1966) concept of demand-induced invention to study the role of income inequality in an endogenous growth model. As rich consumers can satisfy more wants than poor consumers, both prices and market sizes for new products, as well as their evolution over time, are...

This paper discusses long-term trends in the macroeconomic growth performance and in income distribution in Europe and the U.S. We review insights from the recent macroeconomic literature on inequality and growth and use these insights to shed light on the growth and inequality trends.