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By An Interpretative Model, Alfonso Gambardella, Davide Ticchi º, Alfonso Gambardella and Davide Ticchi


We greatfully acknowledge financial support by the EU-DGXII TSER This paper purports to explain some recent trends in several advanced economies. Our model shows that the rise of new scientific and technological opportunities, and particularly the opportunities to develop riskier technological projects, is at the basis of the blossoming of small-medium sized high-tech companies in several regions of the world. This phenomenon, which has been widely documented, and has given rise to several remarks about the growth and employment opportunities of “Silicon Valley” models of industrial activities and employment, is contrasted with an economy based on more stable employment conditions in large firms. Our key result is that both an economy based on large firms and one based on high-tech smaller enterprises lead to higher expected incomes. But while the former implies lower inequality in the sense of lower variance of incomes, the latter implies both higher permanent and transitory inequality. This is consistent with some recent empirical findings about the increase in the variance of incomes in the US and the UK.The famous XVIII century Italian violinist Niccolò Paganini asked a horse-cart conductor to drive him to one of his concerts. Once there, the driver asked for an amazingly high fee, and noted: “Well, this is only half of your fee tonight. ” To which Paganini replied: “Indeed, if you were like me you deserved that much. But to be like me you had to drive your cart on one wheel.” (Old Genoese tale

Year: 1999
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