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on Labor Markets - Supply, Demand, and Wages |
| By: | Maré, David C. (Motu Economic and Public Policy Research Trust); Hyslop, Dean (Motu Economic and Public Policy Research Trust) |
| Abstract: | New Zealand has seen dramatic changes in minimum wage policies since 2000. The adult minimum wage has increased 75% in CPI-adjusted real terms. In addition, the youth minimum wage was abolished in two stages, resulting in a 125% increase in the real minimum wage for 16–19-year-old workers. We review the motivations for minimum wages and the changes and analyse how they have affected workers outcomes. We find that the minimum wage now strongly determines the wages of teenage workers, with the minimum wage now at the median wage of teenagers, and over half of 16–17-year-olds, and about 40% of 18–19-year-olds, earning at or below the minimum. Although we find no clear evidence that increases in the minimum wage have led to adverse employment effects, we expect there are downside risks for youth and low skilled workers' employment. As minimum wage workers are broadly spread across the household income distribution, we conclude that minimum wages are largely ineffective as a redistributive income support policy. |
| Keywords: | minimum wages, employment, earnings inequality, income inequality |
| JEL: | J21 J23 J24 J31 J38 |
| Date: | 2021–04 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp14302&r= |
| By: | Audra Bowlus; Émilien Gouin-Bonenfant; Huju Liu; Lance Lochner; Youngmin Park |
| Abstract: | This paper studies the evolution of individual earnings inequality and dynamics in Canada from 1983 to 2016 using tax files and administrative records. Linking these individuals to their employers (and rich administrative records on firms) beginning in 2001, it also documents the relationship between the earnings dynamics of workers and the size and growth of their employers. It highlights three main patterns over this period: First, with a few exceptions (sharp increase in top 1% and declining gender gap), Canada experienced relatively modest changes in overall earnings inequality, volatility, and mobility between 1983 and 2016. Second, there is considerable variability in earnings inequality and volatility over the business cycle. Third, the earnings dynamics of individuals are strongly related to the size and employment growth of their employers. |
| Keywords: | Econometric and statistical methods; Firm dynamics; Labour markets; Potential output; Productivity |
| JEL: | D22 D31 E24 J24 J31 J63 |
| Date: | 2021–04 |
| URL: | http://d.repec.org/n?u=RePEc:bca:bocawp:21-20&r= |
| By: | Péter Hudomiet; Robert J. Willis |
| Abstract: | This paper analyzes how computerization affected the labor market outcomes of older workers between 1984 and 2017. Using the computerization supplements of the Current Population Survey (CPS) we show that different occupations were computerized at different times, older workers tended to start using computers with a delay compared to younger workers, but computer use within occupations converged to the same levels across age groups eventually. That is, there was a temporary knowledge gap between younger and older workers in most occupations. We estimate how this knowledge gap affected older workers’ labor market outcomes using data from the CPS and the Health and Retirement Study. Our models control for occupation and time fixed effects and in some models; we also control for full occupation-time interactions and use middle aged (age 40-49) workers as the control group. We find strong and robust negative effects of the knowledge gap on wages, and a large, temporary increase in transitions from work to non-participation, consistent with a model of creative destruction in which the computerization of jobs made older workers’ skills obsolete in birth cohorts that experienced computerization relatively late in their careers. We find larger effects on females and on middle-skilled workers. |
| JEL: | J14 J24 J26 J31 |
| Date: | 2021–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:28701&r= |
| By: | Gordon John Anderson |
| Abstract: | The increasing similarity of male and female roles in the labour market over the last 50 years has been dubbed “The Grand Gender Convergence†, though there is concern that the process has stalled. In the absence of gender discrimination and assuming similar preferences for work and human resource acquisition across the gender divide, females and males with similar human resource characteristics should have similar income distributions in equilibrium, in effect there would be equality of opportunity across the gender divide. If that equilibrium is stable, convergence to the equilibrium state should see increasingly similar gender based income distributions accompanied by increasingly similar gender based human resource distributions. Viewed through the lens of an equal opportunity imperative, income convergence is a necessary, but not sufficient condition for a “Grand Gender Convergence†since similarities in income distributions could be achieved with gender based differences in human resources and efforts given a discriminatory rewards structure. Here, using new tools for empirically examining distributional convergence processes, the existence of a “Grand Gender Convergence†in 21st century Canada is examined in the context of such an Equal Opportunity paradigm. While income convergence is almost universally apparent, the same is not true for human resource stocks which appear to be diverging, raising questions about the existence of a Canadian Grand Gender convergence. |
| Keywords: | Gender, Convergence, Distributional Differences, Human Resources. |
| JEL: | J3 J16 J22 J24 J31 J33 N3 |
| Date: | 2021–04–24 |
| URL: | http://d.repec.org/n?u=RePEc:tor:tecipa:tecipa-694&r= |
| By: | Wiljan van den Berge (CPB Netherlands Bureau for Economic Policy Analysis) |
| Abstract: | The 2017 increase in the Dutch youth minimum wage has improved labor market outcomes for low-paid young workers. In particular, these workers’ average wage has risen with 4% without adverse effects on employment or hours worked. These are the key findings of new research on the impact of the minimum wage on labor market outcomes. Minimum wage increases were proposed by several political parties during the Dutch parliamentary elections of 2021, with the aim of increasing job quality in low-paid work. Minimum wages are also a topic of discussion internationally: the United States is witnessing an active campaign for raising minimum wages, and in other countries, such as Germany, minimum wages have recently been introduced or increased. Although many young workers are employed in low-paid jobs, only a relatively small group earns exactly the minimum wage: around 10% in the Netherlands. However, the Dutch minimum wage increase has also boosted incomes of low-paid young workers earning more than the minimum: these so-called spillovers account for 75% of the total wage increase. Further, labor market outcomes have improved most strongly for low-paid young full-time workers who are not enrolled in education: this is important as these workers are less likely to be transient occupants of low-paid jobs. |
| JEL: | J23 J38 J88 |
| Date: | 2021–04 |
| URL: | http://d.repec.org/n?u=RePEc:cpb:discus:422.rdf&r= |
| By: | Gert Bijnens (Economics and Research Department, NBB and KULeuven); John Hutchinson (European Central Bank); Jozef Konings (KULeuven, University of Liverpool and Nazarbayev University); Arthur Saint Guilhem (European Central Bank) |
| Abstract: | Increased investment in clean electricity generation or the introduction of a carbon tax will most likely lead to higher electricity prices. We examine the effect from changing electricity prices on manufacturing employment. Analyzing firm-level data, we find that rising electricity prices lead to a negative impact on labor demand and investment in sectors most reliant on electricity as an input factor. Since these sectors are unevenly spread across countries and regions, the labor impact will also be unevenly spread with the highest impact in Southern Germany and Northern Italy. We also identify an additional channel that leads to heterogeneous responses. When electricity prices rise, financially constrained firms reduce employment more than less constrained firms. This implies a potentially mitigating role for monetary policy. |
| Keywords: | environmental regulation, labor demand, employment, manufacturing industry, monetary policy |
| JEL: | E52 H23 J23 Q48 |
| Date: | 2021–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbb:reswpp:202104-399&r= |
| By: | Francesco Devicienti; Bernardo Fanfani (Università Cattolica del Sacro Cuore; Dipartimento di Economia e Finanza, Università Cattolica del Sacro Cuore) |
| Abstract: | This paper studies firms' adjustment behavior to the growth in labor costs induced by Italian collective bargaining institutions. Our research design compares several firms' outcomes across collective agreements within the same sector and geographic location, exploiting discontinuities in contractual wages' growth as a source of vari- ation in labor costs. Results show that on average employment, revenues, profits and investments fall, wages increase, while firms' productivity and workers' average quality do not change in response to higher labor costs. These e ects are highly heterogeneous across the firms' productivity distribution. Employment, revenues, productivity, profits and investments are positively or not related to contractual wage growth among relatively more ecient firms, while they are negatively related to this shock at less productive companies. More efficient firms tend to substitute high- with low-skilled workers, which are instead more likely to be laid o by less ecient employers. These results suggest that more efficient companies adjust to the generalized growth in labor costs through cost-saving strategies and they may benefit from cleansing effects that tend to increase their product market shares. |
| Keywords: | Collective Bargaining; Minimum Wage; Productivity; Employment; Matched Employer-Employee Data. |
| JEL: | J00 J23 J24 J31 J38 J58 L13 |
| Date: | 2021–04 |
| URL: | http://d.repec.org/n?u=RePEc:ctc:serie1:def102&r= |
| By: | Rafael Dix-Carneiro (Duke University and NBER); Pinelopi Koujianou Goldberg (Yale University); Costas Meghir (Yale University); Gabriel Ulyssea (University College of London) |
| Abstract: | We build an equilibrium model of a small open economy with labor market frictions and imperfectly enforced regulations. Heterogeneous firms sort into the formal or informal sector. We estimate the model using data from Brazil, and use counterfactual simulations to understand how trade affects economic outcomes in the presence of informality. We show the following: 1) Trade openness unambiguously decreases informality in the tradable sector but has ambiguous effects on aggregate informality. 2) The productivity gains from trade are understated when the informal sector is omitted. 3) Trade openness results in large welfare gains even when informality is repressed. 4) Repressing informality increases productivity but at the expense of employment and welfare. 5) The effects of trade on wage inequality are reversed when the informal sector is incorporated in the analysis. 6) The informal sector works as an “unemployment buffer” but not a “welfare buffer” in the event of negative economic shocks. |
| Keywords: | Labor market effects of trade, Informality, Unemployment |
| JEL: | F14 F16 J46 O17 |
| Date: | 2021–04 |
| URL: | http://d.repec.org/n?u=RePEc:upj:weupjo:21-347&r= |
| By: | Renato P. Colistete |
| Abstract: | This paper examines the skills of enslaved labour during the second half of the nineteenth century in the province of São Paulo. The analysis is based on data from 3,376 individuals collected in advertisements of runaway slaves published by São Paulo newspapers between 1854 and 1887. As only a small part of the announcements listed runaways’ occupations, we draw on individual details on sex, age, ethnicity, residence, physical characteristics and other features of fugitives with advertised occupations to predict the skills of the remaining subset of runaways, using classification algorithms from machine learning. Overall, both observed and predicted skilled runaways converged in their characteristics: skilled runaways were mostly male, older than their low-skilled counterparts and predominantly from farms and plantations, rather than urban settings. Africans were not at a disadvantage in artisanal jobs when compared with Brazilian-born runaways, and the skill gap between mixed-race and black fugitives was negligible. Although the enslaved population suffered from very low levels of literacy, the few runaways with an ability to read or write tended to work in more qualified and artisanal occupations, indicating that education may have been valuable even under the appalling conditions of slavery. These results are important both for the analysis of slavery in Brazil and comparisons with other plantation societies in the Americas. |
| Keywords: | Slavery; Runaways; Skills; Skilled slaves; Machine learning; São Paulo; Brazil |
| JEL: | N3 N36 N5 N56 J24 |
| Date: | 2021–04–22 |
| URL: | http://d.repec.org/n?u=RePEc:spa:wpaper:2021wpecon15&r= |
| By: | Christian Moser (Columbia University, Federal Reserve Bank of Minneapolis, and CEPR); Farzad Saidi (University of Bonn and CEPR); Benjamin Wirth (Bavarian State Office for Statistics); Stefanie Wolter (Institute for Employment Research (IAB)) |
| Abstract: | We study the distributional consequences of monetary policy-induced credit supply in the labor market. To this end, we construct a novel dataset that links worker employment histories to firm financials and banking relationships in Germany. Firms in relationships with banks that are more exposed to the introduction of negative interest rates in 2014 experience a relative contraction in credit supply, associated with lower average wages and employment. These effects are heterogeneous within and between firms. Within firms, initially lower-paid workers are more likely to leave employment, while initially higher-paid workers see a relative decline in wages. Between firms, wages fall by more at initially higher-paying employers. In this way, credit affects the distribution of pay and employment in line with predictions of an equilibrium model with both credit and search frictions. |
| Keywords: | Wages, Employment, Worker and Firm Heterogeneity, Monetary Policy, Negative Interest Rates |
| JEL: | J31 E24 J23 G21 E51 |
| Date: | 2021–04 |
| URL: | http://d.repec.org/n?u=RePEc:ajk:ajkdps:086&r= |
| By: | Jakub Grossmann |
| Abstract: | The system of sick-pay is critical for balancing the economic and health costs of infectious diseases. Surprisingly, most research on sick-pay reforms does not rely on variation in worker exposure to diseases when investigating absences from work. This paper studies the effects on absences from work of changes in health-insurance coverage of the first three days of sickness. We explore geographic variation in the prevalence of infectious diseases, primarily the seasonal flu, to provide variation in the need for sickness insurance. Estimates based on the Czech Structure of Earnings Survey imply that when sickness insurance is not available, total hours of work missed are not affected, but employees rely on paid and unpaid leave instead of sick-leave to stay home. The substitution effects are heterogenous across occupations and socio-demographic characteristics of employees, and suggest that workers do not spread infectious diseases at the workplace as a result of the absence of sickness insurance coverage in the first three days of sickness. |
| Keywords: | sickness insurance; exposure to sickness; policy reforms; Czech Republic; |
| JEL: | I13 I18 J3 |
| Date: | 2021–03 |
| URL: | http://d.repec.org/n?u=RePEc:cer:papers:wp690&r= |
| By: | Favara, Marta (University of Oxford); Glewwe, Paul (University of Minnesota); Porter, Catherine (Lancaster University); Sanchez, Alan (Group for the Analysis od Development (GRADE)) |
| Abstract: | Education choices are made based on the expected returns to schooling. If individuals are badly informed, they may make inefficient choices. We directly elicit young people's subjective expectations at the age of 14-15 about earnings under different educational scenarios and find these predict university enrolment by the age of 18-19. Females expect lower earnings than males, likely anticipating the reality of the labour market. Living in a poorer household, weaker numeric skills and lower self-efficacy are also associated with lower expected returns to education. Comparing expectations with the actual earnings from a nationally representative sample of individuals matched by sex, region and place of residence, we find that expectations for earnings upon completing secondary education closely match observed earnings, while there is a tendency to overestimate the returns to completing a university degree. These results hold for both males and females although with considerable variation across regions and population subgroups. |
| Keywords: | subjective expectations, earning realizations, Young Lives, Peru |
| JEL: | I2 J22 J24 |
| Date: | 2021–04 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp14289&r= |
| By: | Costa-Font, Joan (London School of Economics); Salmasi, Luca (Catholic University - Rome); Zaccagni, Sarah (University of Copenhagen) |
| Abstract: | Are workplace smoking bans (WSBs) more than a ban on smoking? We study whether WSBs influence smoking cessation and exert behavioural spillover effects on (i) a number of health behaviours, and (ii) on individuals not directly affected by the bans. Drawing upon quasi-experimental evidence from Russia (a country where about half of the population smokes), which introduced a WBS (in addition to a smoking ban on public places), and adopting a difference-in-differences (DiD) strategy, which compares employed individuals (exposed to the work and public place ban) to those unemployed (exposed only to the ban in public places), we document three sets of findings. First, unlike previous studies (focusing on smoking bans in public places), we find robust evidence that WSBs increase smoking cessation in 2.9 percentage points (pp) among men. Second, we find that upon the WSB, quitters are less likely to use alcohol (6.7pp reduction among men and 3.5 pp among women), reduce their alcohol consumption (10 percent among men) and increase their physical activity (in 4.3 percentage points among men). WSBs are found to influence health behaviours of those not directly affected by the reform, such as never smokers. Our findings are consistent with a model of joint formation of health behaviours, and suggest of the needs to account for a wider set of spillover effects when estimating the welfare effect of WSBs. |
| Keywords: | joint behavioural formation, workplace smoking bans, behavioural spillovers, smoking, drinking, physical activity, healthy identity, Russia |
| JEL: | I18 H75 L51 |
| Date: | 2021–04 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp14299&r= |
| By: | Sur, Pramod Kumar (Osaka University); Sasaki, Masaru (Osaka University) |
| Abstract: | More than half a century has passed since the Great Chinese Famine (1959–1961), and China has transformed from a poor, underdeveloped country to the world's leading emerging economy. Does the effect of the famine persist today? To explore this question, we combine historical data on province-level famine exposure with contemporary data on individual wealth. To better understand if the relationship is causal, we simultaneously account for the well-known historical evidence on the selection effect arising for those who survive the famine and those born during this period, as well as the issue of endogeneity on the exposure of a province to the famine. We find robust evidence showing that famine exposure has had a considerable negative effect on the contemporary wealth of individuals born during this period. Together, the evidence suggests that the famine had an adverse effect on wealth, and it is even present among the wealthiest cohort of individuals in present-day China. |
| Keywords: | famine, wealth, persistence, China |
| JEL: | D31 O15 N35 |
| Date: | 2021–04 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp14291&r= |
| By: | Elizabeth U. Cascio |
| Abstract: | This chapter concerns the state of the literature on early childhood education (ECE) – formal programs offering group instruction for children younger than the standard eligibility age for public education. I describe how ECE programs can be convincingly evaluated and why they may or may not work to narrow gaps in well-being across the lifecycle. The methods, the findings from their application, and their proper interpretation rest critically on who participates and when and where that participation is situated. Because there is a great deal of variation in the answers to these questions even within the United States, I focus on the U.S. experience. Over the past two decades, we have made considerable progress understanding the impacts of large-scale ECE participation in the U.S., as the literature has moved away from – despite being still strongly influenced by – small-scale model interventions. And yet, there is still much to be learned about the long-term effects of participating in ECE programs operating at scale, the mechanisms linking large-scale ECE interventions to later-life well-being, and the effects of ECE quality conditional on ECE participation. |
| JEL: | H75 I24 I28 J24 N32 |
| Date: | 2021–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:28722&r= |
| By: | Catherine Balfe; Patrick Button; Mary Penn; David Schwegman |
| Abstract: | Audit correspondence studies are field experiments that test for discriminatory behavior in active markets. Researchers measure discrimination by comparing how responsive individuals ("audited units") are to correspondences from different types of people. This paper elaborates on the tradeoffs researchers face between sending audited units only one correspondence and sending them multiple correspondences, especially when including less common identity signals in the correspondences. We argue that when researchers use audit correspondence studies to measure discrimination against individuals that infrequently interact with audited units, they raise the risk that these audited units become aware they are being studied or otherwise act differently. We present the result of an audit correspondence study that demonstrates how this detection can occur when researchers send more than one correspondence from an uncommon minority group. We show how this detection leads to attenuated (downwardly biased) estimates of discrimination. |
| JEL: | C93 J15 J16 J71 K42 Z13 |
| Date: | 2021–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:28718&r= |
| By: | Lea Immel; Florian Neumeier; Andreas Peichl |
| Abstract: | We employ panel data from three waves of a large representative population survey carried out between June and November 2020 to assess in what regards and to what extent different groups of the German population are affected by the COVID- 19 crisis. Using common factor analysis, we demonstrate that people’s lives are mainly affected in two ways: First, a notable fraction of the population is concerned that they or their family members and friends may get infected with the coronavirus. Second, many people suffer from socio-economic consequences of the crisis, including a discontinuation of employment, a decrease in household income, and worries about financial troubles. Regressing these two factors on several socio-demographic characteristics reveals that especially the socio-economic consequences vary across population groups. Self-employed persons, marginally employed workers, low-income households, and families with children appear to be burdened over-proportionally. |
| Keywords: | Corona, Covid-19, crisis, pandemic, inequality, Germany |
| JEL: | I10 I14 I18 J11 J20 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_9038&r= |
| By: | Bettina Siflinger; Michaela Paffenholz; Sebastian Seitz; Moritz Mendel; Hans-Martin von Gaudecker |
| Abstract: | Since the start of the CoViD-19 pandemic, a major source of concern has been its effect on mental health. Using pre-pandemic information and five customized questionnaires in the Dutch LISS panel, we investigate how mental health in the working population has evolved along with the most prominent risk factors associated with the pandemic. Overall, mental health decreased sharply with the onset of the first lockdown but recovered fairly quickly. In December 2020, levels of mental health are comparable to those in November 2019. We show that perceived risk of infection, labor market uncertainty, and emotional loneliness are all associated with worsening mental health. Both the initial drop and subsequent recovery are larger for parents of children below the age of 12. Among parents, the patterns are particularly pronounced for fathers if they shoulder the bulk of additional care. Mothers' mental health takes a particularly steep hit if they work from home and their partner is designated to take care during the additional hours. |
| Keywords: | COVID-19, mental health, gender inequality, lockdown |
| JEL: | I10 I14 I18 I30 J22 |
| Date: | 2021–04 |
| URL: | http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2021_271&r= |
| By: | Abel Brodeur (University of Ottawa and IZA); Suraiya Bhuyian (Department of Economics, University of Ottawa); Anik Islam (Department of Economics, University of Ottawa); David Gray (Department of Economics, University of Ottawa) |
| Abstract: | The goal of this piece is to survey the developing and rapidly growing literature on the economic consequences of COVID-19 and the governmental responses, and to synthetize the insights emerging from a very large number of studies. This survey: (i) provides an overview of the data sets and the techniques employed to measure social distancing and COVID-19 cases and deaths; (ii) reviews the literature on the determinants of compliance with and the effectiveness of social distancing; (iii) the macroeconomic and financial impacts, including the modelling of plausible mechanisms; (iv) summarizes the literature on the socio-economic consequences of COVID-19, focusing on those aspects related to labor, health, gender, discrimination, and the environment, and v) summarizes the literature on public policy responses. |
| Keywords: | COVID-19, coronavirus, employment, lockdowns. |
| JEL: | E00 I15 I18 J20 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:ott:wpaper:2103e&r= |
| By: | Sascha O. Becker (SoDa Laboratories, Monash University); Francisco Pino (SoDa Laboratories, Monash University); Jordi Vidal-Robert (SoDa Laboratories, Monash University) |
| Abstract: | The Protestant Reformation in the early 16th century challenged the monopoly of the Catholic Church. The printing press helped the new movement spread its ideas well beyond the cradle of the Reformation in Luther’s city of Wittenberg. The Catholic Church reacted by issuing indexes of forbidden books which blacklisted not only Protestant authors but all authors whose ideas were considered to be in conflict with Catholic doctrine. We use newly digitized data on the universe of books censored by the Catholic Church during the Counter-Reformation, containing information on titles, authors, printers and printing locations. We classify censored books by topic (religion, sciences, social sciences and arts) and language and record when and where books were indexed. Our results show that Catholic censorship did reduce printing of forbidden authors, as intended, but also negatively impacted on the diffusion of knowledge, and city growth. |
| Keywords: | Censorship, Counter-Reformation, Elite Human Capital, Political Economy |
| JEL: | D7 N93 J24 |
| Date: | 2021–04 |
| URL: | http://d.repec.org/n?u=RePEc:ajr:sodwps:2021-04&r= |
| By: | Antoine Dechezleprêtre; David Hémous; Morten Olsen; Carlo Zanella |
| Abstract: | Do higher wages lead to more automation innovation? To answer this question, we first use the frequency of certain keywords in patent text to create a new measure of automation innovation in machinery. We show that our measure is correlated with a reduction in routine tasks in a cross-sectoral analysis in the US. We combine macroeconomic data from 41 countries and information on geographical patent history to build firm-specific measures of low- and high-skill wages. In a firm-level panel analysis, we find that an increase in low-skill wages leads to more automation innovation with an elasticity between 2 and 5. Placebo regressions show that the effect is specific to automation innovations. Finally, we focus on a specific labor market shock, the German Hartz reforms, and show that they reduced automation innovations by those non-German firms relatively more exposed to Germany. |
| Keywords: | Automation, innovation, patents, income inequality |
| JEL: | O31 O33 J20 |
| Date: | 2021–04 |
| URL: | http://d.repec.org/n?u=RePEc:zur:econwp:384&r= |
| By: | Stefano Magrini (Department of Economics, University Of Venice Cà Foscari); Alessandro Spiganti (Department of Economics, University Of Venice Cà Foscari) |
| Abstract: | In the post-pandemic world, digital communication will be integral part of daily working to a higher extent than before, with a disproportionally strong impact on knowledge-based activities, like innovation and research. We present a multi-area endogenous growth model where abstract knowledge flows at no cost across space but tacit knowledge arises from the interaction between researchers and hence is hampered by distance. Digital communication reduces this “cost of distance” for flows of tacit knowledge and reinforces productive specialization. This increases the system-wide growth rate, but at the cost of an increase in inequality within and across areas. |
| Keywords: | Agglomeration, videoconferencing, innovation, disparities |
| JEL: | J24 O31 O41 R12 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:ven:wpaper:2021:13&r= |