Contributions published at Macroeconomics and Political Economy (Fabrizio Zilibotti)

Many technologies used by the LDCs are developed in the OECD economies and are designed to make optimal use of the skills of these richer countries' workforces. Differences in the supply of skills create a mismatch between the requirements of these technologies and the skills of LDC workers, and lead to low productivity in the LDCs. Even when all countries have equal access to new technologies, this technology-skill mismatch can lead to sizable differences in total factor productivity and output per worker. We provide evidence in favor of the cross-industry productivity patterns predicted by our model, and also show that technology-skill mismatch could account for a large fraction of the observed output per worker differences in the data.

We study the employment and distributional effects of regulating (reducing) working time in a general equilibrium model with search-matching frictions. Job creation entails fixed costs, but existing jobs are subject to diminishing returns. We characterize the equilibrium in the de-regulated economy where firms and individual workers freely negotiate wages and hours. Then, we consider the effects of a legislation restricting the maximum working time, while we let wages respond endogenously. Employment effects are sensitive to the representation of preferences. In our benchmark, small reductions in working time, starting from the laissez-faire equilibrium solution, always result in a small increase in the equilibrium employment, while larger reductions reduce employment. The regulation benefits workers, both unemployed and employed (even if wages decrease and even in cases where employment falls), but reduces profits and output.

This paper reviews the recent theoretical and empirical literature that relates education to growth, and draws some lessons for the Swedish experience. First, the “human capital accumulation” approach is discussed: agents decide, at each moment of their lives, to forego time or resources to improve their future productivity. The quality of the educational system is argued to be a crucial determinant of the decision to invest in human capital and of the growth rate of the economy. Hence, qualified teachers and appropriate incentive schemes within the schooling sectors are important for the long-run performance of the economy. Next, the trade-off between basic innovation (promoted by a restricted subset of economic activities) and learning-by-doing (which occurs at a more diffuse level in the economy) is analysed. It is argued that the former can be fostered by investments in “elite” research institutions, while the latter depends on the average educational attainment of the working population. Finally, the relationship between education, growth and inequality is discussed. The second part of the paper analyses recent trends in educational attainments in Sweden. Data show that enrolment rates in tertiary education in Sweden have lagged behind the major industrialised countries during the 1980s. Quantitatively, however, this is unlikely to be a major explanation of the productivity slowdown experienced by Sweden after 1970. But it is emphasised that (i) low educational premiums may harm incentives for people to invest in human capital; and (ii) low relative wages and low-power incentive schemes for teachers may cause a deterioration in the quality of education with negative effects on long-run growth.

This paper offers a theory of development that links the degree of market incompleteness to capital accumulation and growth. At early stages of development, the presence projects limits the degree of risk spreading (diversification) that the economy can achieve. The desire to avoid highly risky investments slows down capital accumulation, and the inability to diversify idiosyncratic risk introduces a large amount of uncertainty in the growth process. The typical development pattern will consist of a lengthy period of “primitive accumulation” with highly variable output, followed by takeoff and financial deepening and, finally, steady growth. “Lucky” countries will spend relatively less time in the primitive accumulation stage and develop faster. Although all agents are price takers and there are no technological spillovers, the decentralized equilibrium is inefficient because individuals do not take into account their impact on others' diversification opportunities. We also show that our results generalize to economies with international capital flows.