Spatial Labor Market Frictions and Economic Convergence: Policy Implications from a Heterogeneous Agent Model

44 Pages Posted: 8 Apr 2013

See all articles by Herbert Dawid

Herbert Dawid

Bielefeld University - Department of Business Administration and Economics; Center for Mathematical Economics

Philipp Harting

Bielefeld University - Faculty of Business Administration and Economics

Michael Neugart

Technical University of Darmstadt

Date Written: February 1, 2013

Abstract

This paper studies the effectiveness of different types of cohesion policies with respect to convergence of regions. A two-region agentbased macroeconomic model is used to analyze short-, medium- and long-term effects of policies improving human capital and fostering adoption of technologies in lagging regions. With fully integrated labor markets the human capital policy positively affects the economically stronger region but reduces production in the targeted weaker region. Subsidies for high technology investment in the weaker region have a positive local output effect and a negative effect on the neighboring region, thereby fostering convergence. When labor markets are not integrated both policies support convergence.

Keywords: cohesion policies, technology adoption, skill complementarity, agent-based model, regional economics

JEL Classification: C63, O33

Suggested Citation

Dawid, Herbert and Harting, Philipp and Neugart, Michael, Spatial Labor Market Frictions and Economic Convergence: Policy Implications from a Heterogeneous Agent Model (February 1, 2013). Bielefeld Working Papers in Economics and Management No. 09-2013, Available at SSRN: https://ssrn.com/abstract=2246704 or http://dx.doi.org/10.2139/ssrn.2246704

Herbert Dawid (Contact Author)

Bielefeld University - Department of Business Administration and Economics ( email )

P.O. Box 100131
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Germany
+49-521-1064843 (Phone)
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Center for Mathematical Economics ( email )

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Philipp Harting

Bielefeld University - Faculty of Business Administration and Economics ( email )

Universitätsstraße 25
Bielefeld, 33615
Germany

Michael Neugart

Technical University of Darmstadt ( email )

Hochschulstraße 1
Darmstadt, 64289
Germany

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