Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/331387 
Year of Publication: 
2025
Series/Report no.: 
WIDER Working Paper No. 55/25
Version Description: 
Correction: An error in the ISBN displayed below was corrected on 19 September 2025.
Publisher: 
The United Nations University World Institute for Development Economics Research (UNU-WIDER), Helsinki
Abstract: 
This paper develops a two-agent worker-capitalist heterogeneous household monetary Schumpeterian growth model to examine the effects of R&D and monetary policies on economic growth and inequality. The model is then calibrated to the South African economy, an upper-middle-income African country infamous for its consistently high level of inequality. A higher nominal interest rate reduces innovation and economic growth but help to mitigate inequality. However, the reduction in consumption inequality comes from a disproportionate decline in the capitalists' condition. In contrast, stronger patent protection fosters innovation and growth but leads to a greater concentration of wealth among capitalists. While broader patents provide long-term gains by boosting productivity and aggregate welfare, higher interest rates consistently decrease societal well-being despite a positive impact on distribution.
Subjects: 
economic growth
inequality
patent policy
monetary policy
JEL: 
E25
E52
O32
O42
Persistent Identifier of the first edition: 
ISBN: 
978-92-9267-614-8
Document Type: 
Working Paper

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