Andreas Pyka, Jens J. Krüger, Uwe Cantner
Twin-Peaks - What the Knowledge-Based Approach Can Say
about the Dynamics of the World Income Distribution
Abstract:
One of the most recently observed stylised facts in the field of economic
growth is the persistent bimodal shape of the world income distribution..
Of course, some theoretical explanations for this new stylised fact already
have been provided by neoclassical growth theory within a maximising framework.
Although innovation and technology are recognised as being the driving
forces behind growth processes, these models maintain the restrictive assumption
of a rational acting representative agent. In this paper we draw on a synergetic
approach of evolutionary economics. In the model, the countries’ productivity
development is depicted as a sequence of relative technological levels
and the movement from one level to the next higher one is governed by stochastic
transition rates. The motivation for these transition rates is based on
the knowledge-based approach of evolutionary economics, thereby taking
into account depleting technological opportunities, the effects of technological
infrastructure and permanent technological obsolescence due to an ubiquitous
scientific progress. With this model we are able to show how a persistent
bimodal distribution - the twin peaks - endogenously emerges via self-organisation.
This simulated distribution matches well with the kernel density plot,
calculated for GDP per worker data relative to the GDP per worker in the
USA over the period 1960-90 for a sample of 104 countries. Both the empirical
and theoretical results show an evolution of the density function toward
bimodality with a decreasing number of countries with low relative productivity
levels and an increasing number of countries with high relative productivity
levels, indicating a prevalent catching-up during the period of investigation.
However, the separation of both groups of countries is getting more significant
over time and therefore further catching-up is expected to become increasingly
difficult in the future.
JEL: O33, C14, N10
Paper:
Paper available as pdf-file.
Beitrag Nr. 189, Volkswirtschaftliche Diskussionsreihe, Institut für
Volkswirtschaftslehre der Universität Augsburg
Contact:
Andreas
Pyka, University of Augsburg, Department of Economics,
Universitätsstr. 16, D-86159 Augsburg, Phone +49-821-598-4179, Fax
+49-821-598-4229
Jens Krüger, University of Augsburg, Department of Economics,
Universitätsstr. 16, D-86159 Augsburg, Phone +49-821-598-4179, Fax
+49-821-598-4229
Uwe Cantner, University of Augsburg, Department of Economics,
Universitätsstr. 16, D-86159 Augsburg, Phone +49-821-598-4179, Fax
+49-821-598-4229
v.
K., 3.12.1999