Costly Investment, Complementarities and the Skill Premium
We propose a new framework to analyse the wage premium behaviour. Building on Acemoglu and Zilibotti (2001), we introduce physical capital and two assumptions: (i) internal costly investment in both capital and R&D; (ii) complementarities between capital goods in production. We find that, for economies relatively abundant in high-skilled labour, a rise in the relative endowment of high-skilled labour is accompanied by a rise in the skill premium. We further find that a rise (i) in investment costs or (ii) in the complementarities degree, requires an increase in the relative endowment of high-skilled labour, for the economy to remain in the same growth equilibrium. For economies relatively abundant in high-skilled labour, such rises are also accompanied by an increase in the skill premium.
In order to set up a list of libraries that you have access to,
you must first login
or sign up.
Then set up a personal list of libraries from your profile page by
clicking on your user name at the top right of any screen.