Redistributive policies and technology diffusion

Manuela Magalhães and Tiago Sequeira

The B.E. Journal of Macroeconomics, 2019, vol. 19, issue 1, 23

Abstract: In this paper we examine the effects of redistributive policies in a transition economy in the presence of technology diffusion on labor and education decisions, and skill-premium. We set a micro-founded dynamic general equilibrium model with a skill-biased technology diffusion, elastic leisure/labor decisions, and investments in education. The economy is populated by two types of households – skilled and unskilled, which become skilled through investments in education. We highlight the importance of the general equilibrium effects of redistributive policies over the leisure/labor and education decisions and wages. Lump-sum transfers reduce investments in education, raising the share of unskilled individuals, decreasing their wage and, raising the skill-premium. Education subsidies raise investments in education, the skills supply, and unskilled wages and reduce the skill-premium during the slowdown of the technology diffusion.

Keywords: education subsidies; income inequality; skill-biased technology diffusion (search for similar items in EconPapers)
JEL-codes: H23 J22 O33 (search for similar items in EconPapers)
Date: 2019
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DOI: 10.1515/bejm-2017-0227

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