This paper develops a Schumpeterian growth model in which institutional quality matters for inequality and growth. In particular, asymmetric information between political authorities and rent-seeking bureaucratic agencies diverts resources from innovative activities - crucial for development to...

Inspired by the Chinese experience, we develop a Schumpeterian growth model of distance to frontier in which economic growth in the developing country is driven by domestic innovation as well as imitation and transfer of foreign technologies through foreign direct investment. We show that...