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HOW POWERFUL ARE NETWORK EFFECTS? A SKILL-BIASED TECHNOLOGICAL CHANGE APPROACH

Published online by Cambridge University Press:  14 November 2018

Oscar Afonso  and
Manuela Magalhäes
Oscar Afonso*
Affiliation:
Universidade do Porto
Manuela Magalhäes
Affiliation:
The Center for Advanced Studies in Management and Economics (CEFAGE)
*
Address correspondence to: Oscar Afonso, Universidade do Porto, Faculdade de Economia and CEFUP, Rua Dr Roberto Frias, 4200-464, Porto, Portugal; e-mail: oafonso@fep.up.pt
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Abstract

Even for the standard skill-biased technological change (SBTC) literature, the generic rise in the skill premium in the face of the relative increase in skilled workers since the 1980s seems a little puzzling. We develop a general equilibrium SBTC growth model that allows the dominance of either the price channel or the market-size channel mechanism through which network spillovers affect the technological-knowledge bias and, thus, the paths of intra-country wage inequality. The proposed mechanisms can accommodate facts not explained by the earlier literature.

Keywords

Network EffectsTechnological-Knowledge BiasSkill PremiumEconomic Growth
Type
Articles
Information
Macroeconomic Dynamics , Volume 24 , Issue 4 , June 2020 , pp. 882 - 919
Copyright
© Cambridge University Press 2018

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Footnotes

We would like to thank the Editor and two anonymous Referees for their comments and suggestions. CEFUP and CEFAGE-UBI have financial support from FCT, Portugal, and FEDER/COMPETE 2020, through grant UID/ ECO/04007/2013 (respectively, POCI-01-0145-FEDER-006890 and POCI-01-0145-FEDER-007659).

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