Is inequality the price to pay for higher growth in middle-income countries?
Tóm tắt
An evolutionary two-sector model is used to study the impact of skill-biased technological change on the growth and inequality paths of a middle-income developing economy. We present four scenarios resulting from changes in a country’s structural conditions and the characteristics of the shock. We show that wage inequality is neither a necessary nor a sufficient condition for growth. A Kuznets dynamic may emerge in the long run in the case of successful catching-up to the high-growth steady state. However, this only happens if adjustment costs significantly hamper the process of skill upgrade. The business cycle and the process of structural change may give rise to sizeable rises in wage inequality in the short term, even when the economy does not break out from the low-growth steady state.
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