Innovation and inequalities

Abstract

Abstract Innovation is a key source of sustainable growth, but it can affect inequalities in many ways—increasing some inequalities and decreasing others. The impact of any particular innovation on inequalities will depend importantly on who controls the property rights to exploit the innovation and what they decide to do with it. The introduction of an innovation can affect the power of different actors in a market, the way markets work, and the returns to different attributes of actors in the market. All of these factors and more will influence how innovation affects inequalities. We would like policy to encourage innovation while making sure that yesterday's innovators do not use their rents to deter innovation by new entrants, thereby eventually undermining productivity growth and social mobility, and increasing inequalities. This requires a combination of regulation, progressive taxation, and enlightened competition policy.