Inter- and intracountry effects of the Covid-19 pandemic on wages and economic growth

• Type: Article in International Scientific Journal
• Date: 2023

Authors

Óscar Afonso (Author) FEP

Journal

Title: Bulletin of Economic Research

Vol. 75 No. 4

Pages: 1291-1322

ISSN: 0307-3378

Publisher: Wiley-Blackwell

Indexing

ISI Web of Knowledge - 2 Citations

Scopus - 3 Citations

Other information

Authenticus ID: P-00Y-PC8

DOI: 10.1111/boer.12412

Abstract (EN): This paper aims to investigate the impact of the Covid-19 pandemic on technological knowledge, wage inequality, and economic growth, by proposing a Direct-Technical-Change model with two economies, an Innovative and other Follower. Six hypotheses are considered: (i) decrease in the unskilled-labor supply, (ii) decrease in the absolute advantage of unskilled labor, (iii) decrease in the intensity of the unskilled sector, (iv) hypothesis (i) combined with a lower decrease in the skilled-labor supply, (v) hypothesis (ii) combined with a lower decrease in the absolute advantage of skilled labor, (vi) all the variations previously considered. By comparing the steady states before and after the shock, we find an increase in the technological-knowledge bias that favors the skill-intensive sector, which positively affects the skill premium. However, in hypotheses (i) and (iv), the decrease in the relative supply of unskilled labor dominates the effect on the skill premium, which thus decreases. The economic growth rate is always penalized except for hypothesis (iii). Hypotheses (ii) and (iv) are undesirable because they increase wage inequality and penalize economic growth. Governments should support innovative activity, the engine of technological-knowledge progress, and thus economic growth, but with caution not to exacerbate the skill premium.

Language: English

Type (Professor's evaluation): Scientific

No. of pages: 32