Economic convergence: Policy implications from a heterogeneous agent model

Authored by H. Dawid, P. Harting, M. Neugart

Date Published: 2014-07

DOI: 10.1016/j.jedc.2014.04.004

Sponsors: No sponsors listed

Platforms: No platforms listed

Model Documentation: Other Narrative Mathematical description

Model Code URLs: Model code not found

Abstract

In this paper we study the effectiveness of different types of cohesion policies with respect to convergence of regions. A two-region agent-based macroeconomic model is used to analyze short-, medium- and long-term effects of policies improving human capital and fostering adoption of technologies in lagging regions. With fully integrated labor markets the human capital policy positively affects the economically stronger region but reduces production in the targeted weaker region. Subsidies for high technology investment in the weaker region have a positive local output effect and a negative effect on the neighboring region, thereby fostering convergence. When labor markets are not integrated both policies support convergence. (C) 2014 Elsevier B.V. All rights reserved.

Tags

Agent-based model Technology adoption Cohesion policies Economic convergence Regional economics Skill complementarity