EconPapers    
Economics at your fingertips  
 

Government Spending Composition, Technical Change, and Wage Inequality

Guido Cozzi and Giammario Impullitti

Journal of the European Economic Association, 2010, vol. 8, issue 6, 1325-1358

Abstract: In this paper we argue that government spending played a significant role in stimulating the wave of innovation that hit the U.S. economy in the late 1970s and in the 1980s, as well as the simultaneous increase in inequality and in education attainments. Since the late 1970s U.S. policymakers began targeting commercial innovations more directly and explicitly. We focus on the shift in the composition of public demand toward high-tech goods, which, by increasing the market-size of innovative firms, functions as a de facto innovation policy tool. We build a quality-ladders non-scale growth model with heterogeneous industries and endogenous supply of skills, and show that an increase in the technological content of public spending stimulates R&D, raises the wage of skilled workers, and, at the same time, stimulates human capital accumulation. A calibrated version of the model suggests that government policy explains between 12% and 15% of the observed increase in wage inequality in the period 1976-1991. (JEL: E62, J31, O33, O41) (c) 2010 by the European Economic Association.

JEL-codes: E62 J31 O33 O41 (search for similar items in EconPapers)
Date: 2010
References: Add references at CitEc
Citations: View citations in EconPapers (56)

Downloads: (external link)
http://onlinelibrary.wiley.com/journal/10.1111/(ISSN)1542-4774/issues link to full text (text/html)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Government spending composition, technical change and wage inequality (2008) Downloads
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:tpr:jeurec:v:8:y:2010:i:6:p:1325-1358

Access Statistics for this article

Journal of the European Economic Association is currently edited by Xavier Vives, George-Marios Angeletos, Orazio P. Attanasio, Fabio Canova and Roberto Perotti

More articles in Journal of the European Economic Association from MIT Press
Bibliographic data for series maintained by The MIT Press ().

 
Page updated 2025-03-20
Handle: RePEc:tpr:jeurec:v:8:y:2010:i:6:p:1325-1358