2022/16 | LEM Working Paper Series | ||||||||||||||||
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The North-South divide: sources of divergence, policies for convergence |
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Lucrezia Fanti, Marcelo C. Pereira and Maria Enrica Virgillito |
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Keywords | |||||||||||||||||
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Agent-Based Models; Technology Gap; Labour Market.
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JEL Classifications | |||||||||||||||||
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C63, J3 , E24, O1
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Abstract | |||||||||||||||||
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Building upon the labour-augmented K+S modelling framework (Dosi et al., 2010,
2017, 2020), we address the analysis of the North-South divide by means of an
agent-based model (ABM) endogenously reproducing divergence between two artificial
macro-regions characterized by identical initial conditions in terms of productive and
innovation structures, but different labour market organizations. Given the ex-ante
initial conditions, we identify the role played by different functioning of the labour
markets on the possible divergence across the two regions. We do find that
divergences in labour market reverberate into asymmetric productive performance due
to negative reinforcing feedback loop dynamics. We then confront alternative policy
schemes by showing that investment policies directed at increasing machine renewal
and higher substitutionary investment are the most effective in fostering the convergence process.
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