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The skill premium and economic growth with costly investment, complementarities and international trade of intermediate goods

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  • Afonso, Oscar
  • Neves, Pedro Cunha
  • Thompson, Maria

Abstract

We analyse the behaviour of the skill premium and the growth rate in an innovator–imitator general equilibrium growth model with international trade of intermediate goods, internal costly investment in both physical capital and R&D, and complementarities between intermediate goods in production. We find that, as opposed to the growth rate, the skill premium is not affected by the complementarities degree nor the investment cost, in any of the countries. We also conclude that, in line with related empirical literature, openness to trade leads to an increase in the skill premium in both countries, while the sign of its impact on the growth rate depends on the magnitude of its counteracting determinants.

Suggested Citation

  • Afonso, Oscar & Neves, Pedro Cunha & Thompson, Maria, 2016. "The skill premium and economic growth with costly investment, complementarities and international trade of intermediate goods," Japan and the World Economy, Elsevier, vol. 37, pages 73-86.
    • Handle: RePEc:eee:japwor:v:37-38:y:2016:i::p:73-86
    DOI: 10.1016/j.japwor.2016.04.002
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    More about this item

    Keywords

    Technological-knowledge bias; Skill premium; Growth rate; Complementarities; Costly investment; International trade;
    All these keywords.

    JEL classification:

    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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