RAMSEY MODEL OF BARRIERS TO GROWTH AND SKILL-BIASED INCOME DISTRIBUTION
IN SOUTH AFRICA
Hildegunn Ekroll Stokke
The paper integrates two mechanisms of economic growth, barriers to
international spillovers and skill-biased effects on the income distribution.
South Africa is an interesting case study because of dramatic changes
in international barriers over time and policy focus to productivity and
distribution. Barriers affect the balance between innovation and adoption
in the productivity growth and thereby the skill-bias. The productivity
dynamics and the distributional implications are investigated in an intertemporal
Ramsey growth model. The model offers a calibrated tariff-equivalence
measure of the sanction effect and allows for counterfactual analysis
of no-sanctions. Increased openness is shown to reduce barriers to technology
adoption leading to skill-biased economic growth and worsened income distribution.
The result is consistent with the observation that economic growth under
sanctions has been slow and with an increase in the relative wage of unskilled
labor. The tradeoff between barriers and skill-bias, foreign spillover
driven productivity growth and income distribution, obviously is a challenge
for growth policy.