Capital-skill complementarity and regional inequality: A spatial general equilibrium analysis

Patrizio Lecca, Damiaan Persyn and Stelios Sakkas

Regional Science and Urban Economics, 2023, vol. 102, issue C

Abstract: This paper employs a large scale numerical spatial general equilibrium model featuring capital-skill complementarities in production to study the distributional implications of a capital-augmenting technological shift across regions and skills groups. Similarly to the existing literature, we find a negative relationship between the labour income share and the capital labour-ratio. Our counterfactual shows that the effects are quite uneven across skills and regions, benefiting mostly high-skilled workers at the detriment of the low and the medium skilled. This is particularly so in more developed regions compared with less developed ones. We show that the effects stem from regional initial conditions, and in particular the regional capital–labour ratio, trade linkages and unemployment rates.

Keywords: Capital-skill complementarity; Technological change; Wage inequality; Regional inequality; Computable general equilibrium models (search for similar items in EconPapers)
JEL-codes: C68 D63 E37 J31 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:regeco:v:102:y:2023:i:c:s0166046223000728

DOI: 10.1016/j.regsciurbeco.2023.103937

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