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Economic convergence: Policy implications from a heterogeneous agent model

H. Dawid, Philipp Harting and Michael Neugart ()

Journal of Economic Dynamics and Control, 2014, vol. 44, issue C, 54-80

Abstract: In this paper we study the effectiveness of different types of cohesion policies with respect to convergence of regions. A two-region agent-based macroeconomic model is used to analyze short-, medium- and long-term effects of policies improving human capital and fostering adoption of technologies in lagging regions. With fully integrated labor markets the human capital policy positively affects the economically stronger region but reduces production in the targeted weaker region. Subsidies for high technology investment in the weaker region have a positive local output effect and a negative effect on the neighboring region, thereby fostering convergence. When labor markets are not integrated both policies support convergence.

Keywords: Cohesion policies; Technology adoption; Skill complementarity; Agent-based model; Regional economics; Economic convergence (search for similar items in EconPapers)
JEL-codes: C63 O33 (search for similar items in EconPapers)
Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:44:y:2014:i:c:p:54-80

DOI: 10.1016/j.jedc.2014.04.004

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Journal of Economic Dynamics and Control is currently edited by J. Bullard, C. Chiarella, H. Dawid, C. H. Hommes, P. Klein and C. Otrok

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