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Skilled Labor, Economic Transition and Income Differences: A Dynamic Approach

Author

Listed:
  • Wei Zou

    (Institute for Advanced Study, Wuhan University)

  • Yong Liu

    (Institute for Advanced Study, Wuhan University)

Abstract

We propose a dynamic model of economic transition in which the supply constraint of skilled labor and skill premium are the focus. We argue that the constraint of skilled labor affect both the beginning date and the subsequent path of modern growth. The model matches the observed multiple paths of income inequality, such as "U-shaped", "inverted U-shaped" or "N-shaped" paths. Hence, the model requires faster technology change and more investment on skill formation to account for the current income differences relative to models that focus only on steady states.

Suggested Citation

  • Wei Zou & Yong Liu, 2010. "Skilled Labor, Economic Transition and Income Differences: A Dynamic Approach," Annals of Economics and Finance, Society for AEF, vol. 11(2), pages 247-275, November.
  • Handle: RePEc:cuf:journl:y:2010:v:11:i:2:p:247-275
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Skilled labor; Economic transition; Income inequality;

    JEL classification:

    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology

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