Government spending composition, technical change and wage inequality



Figure 3. Transitional dynamics


Share of G in high-tech


Skilled employment in efficiency units: h


Difficulty index in high-tech: X2


Innovation arrival rate in high-tech: I2


Unskilled employment in efficiency units: m


Difficulty index in low-tech: X1
0.111----------------------.----------------------.----------------------.----------------------

0.105---------------------■

0.1 ∙                                                                                         -

0.0951----------------'----------------'----------------'----------------

0       100      200      300      400


Relative employment of unskilled workers: θ



Average skill premium


Note: the dotted lines represent the initial position of the economy

30



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