Cohesion Policy and Inequality Dynamics: Insights from a Heterogeneous Agents Macroeconomic Model

44 Pages Posted: 18 Dec 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: December 2013

Abstract

Regions within the European Union differ substantially not only with respect to per capita GDP, but also with respect to income inequality within the regions. This paper studies the effects of different types of technology-oriented cohesion policies, aiming at the reduction of regional differences, on the convergence of regions and the dynamics of income inequality within regions. In particular, policies are analyzed using a two-region agent-based macroeconomic model – the Eurace@Unibi model – where firms in the lagging region receive subsidies for investment in physical capital. It is demonstrated that the short-, medium- and long-term effects of the policies on per-capita output and between as well as within regional inequality differ substantially depending on how successful the policy is in incentivizing firms to choose best available capital vintages and on how flexible labor markets are in the targeted region.

Keywords: cohesion policies, technology adoption, agent-based model, inequality

JEL Classification: C63, O33

Suggested Citation

Dawid, Herbert and Harting, Philipp and Neugart, Michael, Cohesion Policy and Inequality Dynamics: Insights from a Heterogeneous Agents Macroeconomic Model (December 2013). Bielefeld Working Papers in Economics and Management No. 26-2013, Available at SSRN: https://ssrn.com/abstract=2369187 or http://dx.doi.org/10.2139/ssrn.2369187

Herbert Dawid (Contact Author)

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

P.O. Box 100131
D-33501 Bielefeld, NRW 33501
Germany
+49-521-1064843 (Phone)
+49-521-1062994 (Fax)

Center for Mathematical Economics ( email )

Postfach 10 01 31
Bielefeld, D-33501
Germany

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

HOME PAGE: http://www.vwl3.wi.tu-darmstadt.de

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