Costly investment, complementarities and the skill premium

We propose a new framework to analyse the relationship between the relative high-skilled labour endowment, the skill premium and economic growth. Building on Acemoglu and Zilibotti (2001), we introduce physical capital; internal costly investment in both capital and R&D; and complementarities between intermediate goods. We only find a positive relationship between the relative labour endowment and both the skill premium and economic growth within determined intervals of relative labour endowment values, which vary with the absolute productive advantage of high over low-skilled labour. The model thus accommodates theoretically mixed empirical results on the relative labour endowment-skill premium relationship. We further find that the impact on both the relative labour endowment and the skill premium of a rise in investment costs or in the complementarities degree depends on: (i) the absolute productivity advantage of high over low-skilled labour; and (ii) the relative labour endowment.     

Interactions between electricity generation sources and economic activity in two Nord Pool systems. Evidence from Estonia and Sweden

The interactions between electricity sources and industrial production in Estonia and Sweden are analysed based on monthly data. The availability of data defines the time spans from January 2010 to September 2015 for Sweden and from April 2010 to December 2014 for Estonia. These countries are particularly interesting to study because of their dissimilar generation mix. Estonia’s generation mix is based on oil shale, while Sweden’s is based on nuclear plants and hydroelectricity. In short, both countries’ energy mixes are based on endogenous natural resources. The ARDL model was applied, allowing the long-run and short-run effects to be captured. The results prove that economic growth is sustained by natural endogenous resources. Estonia should continue to improve the usage of renewable energies, using fossil sources in support, in order to reduce emissions and to meet international environmental commitments. Sweden should promote the efficient usage of various renewable sources.     

On the effect of R&D in returns to experience

Using a recent macroeconomic database, we empirically estimate an ‘erosion effect’: we show that Total Factor Productivity (TFP) growth decreases returns to experience. The ‘erosion effect’ is typically stronger within the rich and the most experienced countries in the world. This article complements the scarce microeconomic literature on the issue and the theoretical macroeconomic literature recently coming to the conclusion that this effect has important implications for the interaction between human capital accumulation and TFP.