published in: Journal of Evolutionary Economics, 2010, 20 (2), 265-306
We draw on a dynamical two-sector model and on a calibration exercise to study the impact
of a skill-biased technological shock on the growth path and income distribution of a
developing economy. The model builds on the theoretical framework developed by Silverberg
and Verspagen (1995) and on the idea of localised technological change (Atkinson and
Stiglitz, 1969) with sector-level increasing returns to scale. We find that a scenario of
catching-up to the high-growth steady state is predictable for those economies starting off
with a high enough endowment of skilled workforce. During the transition phase, if the skill
upgrade process for the workforce is relatively slow, the typical inverse-U Kuznets pattern
emerges for income inequality in the long run. Small scale Kuznets curves, driven by sectoral
business cycles, may also be detected in the short run. Conversely, economies initially
suffering from significant skill shortages remain trapped in a low-growth steady state.
Although the long-term trend is one of decreasing inequality, small-scale Kuznets curves may
be detected even in this case, which may cause problems of observational equivalence
between the two scenarios for the policy-maker. The underlying factors of inequality, and the
evolution of a more comprehensive measure of inequality than the one normally used, are
also analysed.
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