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Redistributive policies and technology diffusion

Author

Listed:
  • Magalhães Manuela

    (Departament of Economics, Rua Dr. António Bernardino de Almeida, 541.4200-072 Porto, Portugal)

  • Sequeira Tiago Neves

    (Departamento de Gestão e Economia and CEFAGE-UBI, Universidade da Beira Interior, Avenida Marques d’Avila e Bolama, 6200-001 Covilhã, Portugal, Tel: +351 225 572 000)

Abstract

In this paper we examine the effects of redistributive policies in a transition economy in the presence of technology diffusion on labor and education decisions, and skill-premium. We set a micro-founded dynamic general equilibrium model with a skill-biased technology diffusion, elastic leisure/labor decisions, and investments in education. The economy is populated by two types of households – skilled and unskilled, which become skilled through investments in education. We highlight the importance of the general equilibrium effects of redistributive policies over the leisure/labor and education decisions and wages. Lump-sum transfers reduce investments in education, raising the share of unskilled individuals, decreasing their wage and, raising the skill-premium. Education subsidies raise investments in education, the skills supply, and unskilled wages and reduce the skill-premium during the slowdown of the technology diffusion.

Suggested Citation

  • Magalhães Manuela & Sequeira Tiago Neves, 2019. "Redistributive policies and technology diffusion," The B.E. Journal of Macroeconomics, De Gruyter, vol. 19(1), pages 1-23, January.
    • Handle: RePEc:bpj:bejmac:v:19:y:2019:i:1:p:23:n:10
    DOI: 10.1515/bejm-2017-0227
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    References listed on IDEAS

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    More about this item

    Keywords

    education subsidies; income inequality; skill-biased technology diffusion;
    All these keywords.

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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