Inter‐ and intracountry effects of the Covid‐19 pandemic on wages and economic growth

Óscar Afonso

Bulletin of Economic Research, 2023, vol. 75, issue 4, 1291-1322

Abstract: This paper aims to investigate the impact of the Covid‐19 pandemic on technological knowledge, wage inequality, and economic growth, by proposing a Direct‐Technical‐Change model with two economies, an Innovative and other Follower. Six hypotheses are considered: (i) decrease in the unskilled‐labor supply, (ii) decrease in the absolute advantage of unskilled labor, (iii) decrease in the intensity of the unskilled sector, (iv) hypothesis (i) combined with a lower decrease in the skilled‐labor supply, (v) hypothesis (ii) combined with a lower decrease in the absolute advantage of skilled labor, (vi) all the variations previously considered. By comparing the steady states before and after the shock, we find an increase in the technological‐knowledge bias that favors the skill‐intensive sector, which positively affects the skill premium. However, in hypotheses (i) and (iv), the decrease in the relative supply of unskilled labor dominates the effect on the skill premium, which thus decreases. The economic growth rate is always penalized except for hypothesis (iii). Hypotheses (ii) and (iv) are undesirable because they increase wage inequality and penalize economic growth. Governments should support innovative activity, the engine of technological‐knowledge progress, and thus economic growth, but with caution not to exacerbate the skill premium.

Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1111/boer.12412

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:buecrs:v:75:y:2023:i:4:p:1291-1322

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0307-3378

Access Statistics for this article

More articles in Bulletin of Economic Research from Wiley Blackwell
Bibliographic data for series maintained by Wiley Content Delivery ().