IDEAS home Printed from https://ideas.repec.org/a/cuf/journl/y2010v11i2p247-275.html
   My bibliography  Save this article

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
    as

    Download full text from publisher

    File URL: http://www.aeconf.net/Articles/Nov2010/aef110203.pdf
    Download Restriction: no
    File URL: http://down.aefweb.net/AefArticles/aef110203.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Alberto Alesina & Dani Rodrik, 1994. "Distributive Politics and Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 109(2), pages 465-490.
    2. Brian Aitken & Ann Harrison & Robert E. Lipsey, 2022. "Wages and foreign ownership A comparative study of Mexico, Venezuela, and the United States," World Scientific Book Chapters, in: Globalization, Firms, and Workers, chapter 4, pages 61-87, World Scientific Publishing Co. Pte. Ltd..
    3. Hongyi Li & Heng‐fu Zou, 1998. "Income Inequality is not Harmful for Growth: Theory and Evidence," Review of Development Economics, Wiley Blackwell, vol. 2(3), pages 318-334, October.
    4. Xiaobo Zhang & Kevin Honglin Zhang, 2002. "Regional Inequality," Chapters, in: Shang-Jin Wei & Guanzhong James Wen & Huizhong Zhou (ed.), The Globalization of the Chinese Economy, chapter 8, Edward Elgar Publishing.
    5. Benabou, R., 1992. "Heterogeneity, Stratification, and Growth," Working papers 93-4, Massachusetts Institute of Technology (MIT), Department of Economics.
    6. Kanbur, Ravi, 2000. "Income distribution and development," Handbook of Income Distribution, in: A.B. Atkinson & F. Bourguignon (ed.), Handbook of Income Distribution, edition 1, volume 1, chapter 13, pages 791-841, Elsevier.
    7. Lindert, Peter H. & Williamson, Jeffrey G., 1982. "Revising England's social tables 1688-1812," Explorations in Economic History, Elsevier, vol. 19(4), pages 385-408, October.
    8. Oded Galor & Omer Moav, 2004. "From Physical to Human Capital Accumulation: Inequality and the Process of Development," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 71(4), pages 1001-1026.
    9. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth through Creative Destruction," Econometrica, Econometric Society, vol. 60(2), pages 323-351, March.
    10. Daron Acemoglu, 1998. "Why Do New Technologies Complement Skills? Directed Technical Change and Wage Inequality," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 113(4), pages 1055-1089.
    11. Eli Berman & John Bound & Zvi Griliches, 1994. "Changes in the Demand for Skilled Labor within U. S. Manufacturing: Evidence from the Annual Survey of Manufactures," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 109(2), pages 367-397.
    12. Daron Acemoglu, 2002. "Directed Technical Change," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 69(4), pages 781-809.
    13. Ravi Kanbur & Xiaobo Zhang, 2005. "Fifty Years of Regional Inequality in China: a Journey Through Central Planning, Reform, and Openness," Review of Development Economics, Wiley Blackwell, vol. 9(1), pages 87-106, February.
    14. Oded Galor & Joseph Zeira, 1993. "Income Distribution and Macroeconomics," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 60(1), pages 35-52.
    15. Daron Acemoglu, 2002. "Technical Change, Inequality, and the Labor Market," Journal of Economic Literature, American Economic Association, vol. 40(1), pages 7-72, March.
    16. Benabou, Roland, 1996. "Heterogeneity, Stratification, and Growth: Macroeconomic Implications of Community Structure and School Finance," American Economic Review, American Economic Association, vol. 86(3), pages 584-609, June.
    17. repec:dau:papers:123456789/10091 is not listed on IDEAS
    18. Simon Kuznets & Elizabeth Jenks, 1953. "Shares of Upper Income Groups in Income and Savings (1953)," NBER Books, National Bureau of Economic Research, Inc, number kuzn53-1, March.
    19. Hertel, Thomas & Zhai, Fan, 2006. "Labor market distortions, rural-urban inequality and the opening of China's economy," Economic Modelling, Elsevier, vol. 23(1), pages 76-109, January.
    20. Fan, Shenggen & Kanbur, Ravi & Zhang, Xiaobo, 2008. "Regional Inequality In China: An Overview," Working Papers 51157, Cornell University, Department of Applied Economics and Management.
    21. Roland Bénabou, 1996. "Equity and Efficiency in Human Capital Investment: The Local Connection," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 63(2), pages 237-264.
    22. Daron Acemoglu, 2003. "Patterns of Skill Premia," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 70(2), pages 199-230.
    23. Cecilia Garcia-Penalosa & Eve Caroli & Philippe Aghion, 1999. "Inequality and Economic Growth: The Perspective of the New Growth Theories," Journal of Economic Literature, American Economic Association, vol. 37(4), pages 1615-1660, December.
    24. Gary D. Hansen & Edward C. Prescott, 2002. "Malthus to Solow," American Economic Review, American Economic Association, vol. 92(4), pages 1205-1217, September.
    25. Ahluwalia, Montek S, 1976. "Income Distribution and Development: Some Stylized Facts," American Economic Review, American Economic Association, vol. 66(2), pages 128-135, May.
    26. Anand, Sudhir & Kanbur, S. M. R., 1993. "Inequality and development A critique," Journal of Development Economics, Elsevier, vol. 41(1), pages 19-43, June.
    27. Barro, Robert J, 2000. "Inequality and Growth in a Panel of Countries," Journal of Economic Growth, Springer, vol. 5(1), pages 5-32, March.
    28. Deininger, K & Squire, L, 1996. "Measuring Income Inequality : A New Data-Base," Papers 537, Harvard - Institute for International Development.
    29. Simon Kuznets & Elizabeth Jenks, 1953. "Shares of Upper Income Groups in Savings," NBER Chapters, in: Shares of Upper Income Groups in Income and Savings (1953), pages 171-218, National Bureau of Economic Research, Inc.
    30. Hugo Rojas-Romagosa & J.F. Francois, 2008. "Reassessing the relationship between inequality and development," CPB Discussion Paper 107, CPB Netherlands Bureau for Economic Policy Analysis.
    31. Anand, Sudhir & Kanbur, S. M. R., 1993. "The Kuznets process and the inequality--development relationship," Journal of Development Economics, Elsevier, vol. 40(1), pages 25-52, February.
    32. Philippe Aghion & Patrick Bolton, 1997. "A Theory of Trickle-Down Growth and Development," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 64(2), pages 151-172.
    33. Hugo Rojas-Romagosa & J.F. Francois, 2008. "Reassessing the relationship between inequality and development," CPB Discussion Paper 107.rdf, CPB Netherlands Bureau for Economic Policy Analysis.
    34. Li, Hongyi & Zou, Heng-fu, 1998. "Income Inequality Is Not Harmful for Growth: Theory and Evidence," Review of Development Economics, Wiley Blackwell, vol. 2(3), pages 318-334, October.
    35. Kristin J. Forbes, 2000. "A Reassessment of the Relationship between Inequality and Growth," American Economic Review, American Economic Association, vol. 90(4), pages 869-887, September.
    36. Philippe Aghion, 2002. "Schumpeterian Growth Theory and the Dynamics of Income Inequality," Econometrica, Econometric Society, vol. 70(3), pages 855-882, May.
    37. Ahluwalia, Montek S., 1976. "Inequality, poverty and development," Journal of Development Economics, Elsevier, vol. 3(4), pages 307-342, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Shan Pan, 2019. "Sectoral Heterogeneity and the "Dual" Structural Change in China," Annals of Economics and Finance, Society for AEF, vol. 20(1), pages 413-436, May.
    2. Lu Tan & Jingsong Pei, 2023. "Open Government Data and the Urban–Rural Income Divide in China: An Exploration of Data Inequalities and Their Consequences," Sustainability, MDPI, vol. 15(13), pages 1-18, June.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Wan, Guanghua & Lu, Ming & Chen, Zhao, 2006. "The inequality-growth nexus in the short and long run: Empirical evidence from China," Journal of Comparative Economics, Elsevier, vol. 34(4), pages 654-667, December.
    2. Ozan Hatipoglu, 2007. "Inequality and Growth. Where Are We Headed? A Survey," Working Papers 2007/07, Bogazici University, Department of Economics.
    3. Grossmann, Volker, 2008. "Risky human capital investment, income distribution, and macroeconomic dynamics," Journal of Macroeconomics, Elsevier, vol. 30(1), pages 19-42, March.
    4. Bourguignon, Francois, 2005. "The Effect of Economic Growth on Social Structures," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 27, pages 1701-1747, Elsevier.
    5. Eicher, Theo S. & Garcia-Penalosa, Cecilia, 2001. "Inequality and growth: the dual role of human capital in development," Journal of Development Economics, Elsevier, vol. 66(1), pages 173-197, October.
    6. Dustin Chambers, 2005. "Inequality and Growth: A Semiparametric Investigation," Computing in Economics and Finance 2005 132, Society for Computational Economics.
    7. Atolia, Manoj & Chatterjee, Santanu & Turnovsky, Stephen J., 2012. "Growth and inequality: Dependence on the time path of productivity increases (and other structural changes)," Journal of Economic Dynamics and Control, Elsevier, vol. 36(3), pages 331-348.
    8. Martin Ravallion, 2013. "The Idea of Antipoverty Policy," NBER Working Papers 19210, National Bureau of Economic Research, Inc.
    9. Chen, Yu-chin & Turnovsky, Stephen J., 2010. "Growth and inequality in a small open economy," Journal of Macroeconomics, Elsevier, vol. 32(2), pages 497-514, June.
    10. Christophe Ehrhart, 2009. "The effects of inequality on growth: a survey of the theoretical and empirical literature," Working Papers 107, ECINEQ, Society for the Study of Economic Inequality.
    11. Arshad Ali Bhatti & M. Emranul Haque & Denise R. Osborn, 2015. "Threshold Effects of Inequality on the Process of Economic Growth," Centre for Growth and Business Cycle Research Discussion Paper Series 205, Economics, The University of Manchester.
    12. Ferreira, Francisco H. G. & Lakner, Christoph & Lugo, Maria Ana & Ozler, Berk, 2014. "Inequality of opportunity and economic growth : a cross-country analysis," Policy Research Working Paper Series 6915, The World Bank.
    13. Lin Shu-Chin & Huang Ho-Chuan & Kim Dong-Hyeon & Yeh Chih-Chuan, 2009. "Nonlinearity between Inequality and Growth," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 13(2), pages 1-20, May.
    14. Shinhye Chang & Rangan Gupta & Stephen M. Miller, 2018. "Causality Between Per Capita Real GDP and Income Inequality in the U.S.: Evidence from a Wavelet Analysis," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 135(1), pages 269-289, January.
    15. Cristiano Perugini & Gaetano Martino, 2008. "Income Inequality Within European Regions: Determinants And Effects On Growth," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 54(3), pages 373-406, September.
    16. Adelaide Duarte & Marta Simões, 2009. "Channels of transmission of inequality to growth: A survey of the theory and evidence from a Portuguese perspective," GEMF Working Papers 2009-07, GEMF, Faculty of Economics, University of Coimbra.
    17. Isaac Ehrlich & Jinyoung Kim, 2007. "The Evolution of Income and Fertility Inequalities over the Course of Economic Development: A Human Capital Perspective," Journal of Human Capital, University of Chicago Press, vol. 1(1), pages 137-174.
    18. Cecilia García-Peñalosa & Stephen Turnovsky, 2006. "Growth and income inequality: a canonical model," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 28(1), pages 25-49, May.
    19. Marrero, Gustavo A. & Rodríguez, Juan G., 2013. "Inequality of opportunity and growth," Journal of Development Economics, Elsevier, vol. 104(C), pages 107-122.
    20. Martin Ravallion, 2003. "Targeted transfers in poor countries : revisiting the trade-offs and policy options," Social Protection Discussion Papers and Notes 27869, The World Bank.

    More about this item

    Keywords

    Skilled labor; Economic transition; Income inequality;
    All these keywords.

    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

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cuf:journl:y:2010:v:11:i:2:p:247-275. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Qiang Gao (email available below). General contact details of provider: https://edirc.repec.org/data/emcufcn.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.