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A Cge Model for Labour Policy Assessment

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  • Margherita Scarlato

Abstract

In the less developed regions of Italy, the so-called Mezzogiorno, the level of human capital is lower compared to the advanced regions od the Centre-North. We use a Computable General Equilibrium (Cge) Model to show that an increase in the demand and supply of skilled labor in the human capital-scarce regions has a smaller impact on the production activities, the aggregate income and the investments of both North and South compared to an equivalent increase in the human capital-abundant regions. This result leads to a wrong incentive for the private agents towards the underinvestment in human capital and locks the Southern regions in a trap at a low level of both economic development and human capital accumulation. Absent suitable shocks or policy interventions, this outcome is self-reinforcing.

Suggested Citation

  • Margherita Scarlato, 2002. "A Cge Model for Labour Policy Assessment," QA - Rivista dell'Associazione Rossi-Doria, Associazione Rossi Doria, issue 3, November.
    • Handle: RePEc:rar:journl:0166
    as

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    References listed on IDEAS

    as
    1. repec:rtv:ceiswp:121 is not listed on IDEAS
    2. Mariano D'Antonio & Margherita Scarlato, 2000. "Capitale umano e sviluppo economico un modello di equilibrio economico generale per il centro-nord e il mezzogiorno d'Italia," Departmental Working Papers of Economics - University 'Roma Tre' 0016, Department of Economics - University Roma Tre.
    3. Olivier Bontout & Sébastien Jean, 1998. "Wages and Unemployment: Trade-off Under Different Labour Market Paradigms," Working Papers 1998-13, CEPII research center.
    4. Redding, Stephen, 1996. "The Low-Skill, Low-Quality Trap: Strategic Complementarities between Human Capital and R&D," Economic Journal, Royal Economic Society, vol. 106(435), pages 458-470, March.
    5. Olivier Bontout & Sébastien Jean, 2000. "What Drove Relative Wages in France? Structural Decomposition Analysis in a General Equilibrium Framework, 1970-1992," Working Papers 2000-03, CEPII research center.
    6. Andrea Bassanini & Jørn Henrik Rasmussen & Stefano Scarpetta, 1999. "The Economic Effects of Employment-Conditional Income Support Schemes for the Low-Paid: An Illustration from a CGE Model Applied to Four OECD Countries," OECD Economics Department Working Papers 224, OECD Publishing.
    7. Paul M. Romer, 2001. "Should the Government Subsidize Supply or Demand in the Market for Scientists and Engineers?," NBER Chapters, in: Innovation Policy and the Economy, Volume 1, pages 221-252, National Bureau of Economic Research, Inc.
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    More about this item

    Keywords

    Human Capital; Cge Models; Regional Gaps;
    All these keywords.

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • R58 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Regional Development Planning and Policy

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