This paper explores the relationship between product innovation and consumption inequality. We employ a modified version of the agent-based macroeconomic model in Georges (2011, 2015). A rise in rents accruing to salaried workers can shift both production and R&D spending toward products...

We develop an agent-based macroeconomic model in which product innovation is the fundamental driver of growth and business cycle fluctuations. The model builds on a hedonic approach to the product space and product innovation developed in Georges (2011)