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

Oscar Afonso, Pedro Neves () and Maria Thompsom ()
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Pedro Neves: Faculdade de Economia, Universidade do Porto, Portugal
Maria Thompsom: NIPE, and Escola de Economia e Gestão da Universidade do Minho
Authors registered in the RePEc Author Service: Maria Thompson

FEP Working Papers from Universidade do Porto, Faculdade de Economia do Porto

Abstract: We examine the behavior 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: J31 O31 O33 O47 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2010-07
New Economics Papers: this item is included in nep-dge, nep-fdg and nep-knm
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Working Paper: Costly Investment, Complementarities, International Technological-Knowledge Diffusion and the Skill Premium (2010)
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