Interregional Income Redistribution and Convergence in a Model with Perfect Capital Mobility and Unionized Labor Markets |
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Authors: | Email author" target="_blank">Luigi?BonattiEmail author |
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Institution: | (1) Facoltà di Economia, University of Bergamo, via dei Caniana 2, 20127 Bergamo, Italy |
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Abstract: | The model presents a general equilibrium dynamic model of an economy consisting of many regions. Capital is perfectly mobile and labor is immobile across regions. Wages are determined by local unions. There is training on the job and strategic complementarity between investment in physical capital by firms and investment in becoming “trainable’’ by workers. Structurally similar regional economies preserve forever their differences in per capita output and employment rate, if the workers’ non-labor income is equalized across regions by interregional income redistribution operated via central budget. Regional decentralization of income redistribution allows convergence in per capita output and employment rate. |
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Keywords: | growth on-the-job training skilled labor strategic complementarity fiscal transfers |
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