Naoki Yoshihara , University of Massachusetts Amherst Roberto Veneziani , Queen Mary University London
November 22, 2019
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We study the effects of innovations on income distribution in capitalist economies characterised by a drive to accumulate. Consistent with the basic intuitions of Marx's theory of technical change, we show that there is no obvious relation between ex-ante profitable innovations and the income distribution that actually emerges in equilibrium, and individually rational choices of technique do not necessarily lead to optimal outcomes. Innovations may even cause the disappearance of all equilibria. Methodologically, it is not possible to fully understand the 'creative destruction' induced by innovations without capturing the dialectic between individual choices and aggregate outcomes, and the complex network of relations typical of capitalist economies.
J.E.L classification codes: 033; 033; B51
Keywords:technical change, income distribution, profit rate