Income inequality metrics

Labour economics

Mathematics

Demographic economics

Inequality

Causality (physics)

Quantum mechanics

Sociology

Instrumental variable

Economics

Variable (mathematics)

Economic inequality

Social mobility

Panel data

Mathematical analysis

Econometrics

Income distribution

Physics

Social science

The Review of Economic Studies

In this article, we use cross-state panel and cross-U.S. 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.

Innovation and Top Income Inequality