Does Income Redistribution Impede Innovation?

Economic inequalities have been increasing in many countries since the 1980s provoking calls for more income redistribution. One argument against increased redistribution is that it could hamper innovation and technological progress. To the best of our knowledge, this is the first paper that empirically investigates the relationship between government redistributive policies at the top of income distribution and innovative activity in a panel of countries. We use new, high-quality and cross-country comparable panel data on income redistribution from distributional national accounts. The sample covers 34 advanced and emerging countries over 1980-2010. We do not find any negative impact of the redistributive effect on innovation in the cross-country setting. This result is robust to the use of various measures of income redistribution and patent-based indicators of innovation (patent counts, patent citations and patent originality)