Costly Investment, Complementarities, International Technological-Knowledge Diffusion and the Skill Premium

Oscar Afonso, Pedro Neves and Maria Thompson
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Pedro Neves: Universidade do Porto

No 19/2010, NIPE Working Papers from NIPE - Universidade do Minho

Abstract: We examine the behaviour of the skill premium in a two-country general equilibrium growth model assuming (i) technological-knowledge diffusion; (ii) internal costly investment in both physical capital and R&D; and (iii) complementarities between intermediate goods in production. We find that these three economic features affect the steady-state growth rate in both countries. However, only in the imitator country do they influence the skill premium. We also find that the steady-state skill premium in the innovator country is affected by its relative labor productivity rather than by its relative labor endowments. This result contrasts with most skill-biased technological change models and suggests that the sustained increase in the skill premium observed in several developed countries over the last three decades may have been due to increases in the relative productive advantage of skilled labor.

Keywords: technological-knowledge bias; skill premium; complementarities; costly investment; technological-knowledge diffusion (search for similar items in EconPapers)
JEL-codes: F43 J31 O31 O33 O47 (search for similar items in EconPapers)
Date: 2010
New Economics Papers: this item is included in nep-dge, nep-knm and nep-opm
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Working Paper: Costly Investment, Complementarities, International Technological-Knowledge Diffusion and the Skill Premium (2010)
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