Inequality and Expectations in a Model of Technology Adoption and Growth

28 Pages Posted: 27 Mar 2017

See all articles by Surbhi Badhwar

Surbhi Badhwar

University of Delhi - Delhi School of Economics

Mausumi Das

Delhi School of Economics

Date Written: September 1, 2014

Abstract

This paper highlights the role of initial wealth inequality in determining the technology adoption decision of firms, which in turn impacts upon the overall productivity in an economy. Wealth inequality interacts with producers' expectations to generate mutiple equilibria: poor economies where initial wealth inequality is too high are perpetually stuck at a bad equilibrium with poor technology; economies with moderate degree of inequality can oscillate between the bad and the good equilibria depending on producers' expectations; and rich economies with sufficiently low degree of wealth inequality always enjoy a self-sustaining good equilibrium, characterized by the adoption of advanced technology.

Keywords: Inequality, Expectation, Technlogy Adoption

JEL Classification: D30, D84, O33

Suggested Citation

Badhwar, Surbhi and Das, Mausumi, Inequality and Expectations in a Model of Technology Adoption and Growth (September 1, 2014). Available at SSRN: https://ssrn.com/abstract=2941062

Surbhi Badhwar

University of Delhi - Delhi School of Economics ( email )

G.T. Road,
Shahdara
Delhi-110007, Delhi 110032
India

Mausumi Das (Contact Author)

Delhi School of Economics ( email )

Delhi University North Campus
Delhi, Delhi 110007
India

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