We present a model of technologically interconnected countries that benefit and potentially contribute to advances in the world technology frontier. Greater inequality between successful and unsuccessful entrepreneurs increases entrepreneurial effort and a country’s contribution to that frontier. Under plausible assumptions, the world equilibrium is asymmetric, involving different economic institutions and technology levels for different countries. Some countries become technology leaders and opt for a type of “cutthroat” capitalism with greater inequality and innovations, while others free ride on the cutthroat incentives of the leaders and choose a more “cuddly” form of capitalism with greater social insurance for entrepreneurs.

Journal of Political Economy

University of Chicago Press

Acemoglu, Daron, James A. Robinson, and Thierry Verdier. “Asymmetric Growth and Institutions in an Interdependent World.” Journal of Political Economy 125, no. 5 (October 2017): 1245–1305.

Version:Final published version

0022-3808

1537-534X