TRANSFORM

• Ref.: PID2023-153073NB-I00
• Principal Investigator: Omar Rachedi, Ioana Schiopu
• Funding body: MCIU-FEDER
• Duration: 36 months

The overarching goal of this research program is to advance the understanding of drivers and social impacts of structural changes arising in modern economies. We focus on four such prominent transformations: the growing importance of skills, automation and labor market polarization, the change in the structure of public investment and climate change. At the same time, making progress in understanding complex structural transformations is also critical from a policy perspective, as they raise deep concerns within the society at large, such as increased demand for skills and higher education costs, rising income and wealth inequality, and climate change repercussions. The first research line is centered on the evolution of labor force quality amid structural shifts in the economy, driven by factors like technological advancements, which influence the returns on educational investments. Focusing on the higher education sector, our project explores first the interplay between individual incentives for skill investment and the quality of the learning environment, responding to macroeconomic shifts and policy changes. Additionally, we investigate alternative sources of skill formation, such as on-the-job learning, which has become increasingly significant in the face of rapid technological change.

Second, we study how structural transformation and automation feed into the overall polarization of the labor market (the rise in high and low paid jobs at the expense of middle paying ones), as well as policies aimed at reducing disparities in the labor markets. Focusing on the Spanish labor market, in a first project we study possible drivers of labor market dynamics over the last decade, as well as the pattern of spillovers in labor polarization across regions. In a second project we analyze the effects of minimum wage on technology adoption and changes on skill and task demands for workers.

In a third research line, we consider two aspects associated with the allocation of public resources. On one front, our objective is to investigate the links between income inequality and demand for redistribution through public investment in education. The second line of inquiry considers the size and structure of public investment during the business cycle. We study the aggregate effects of the changing structure of public investment by explicitly considering the heterogeneity across investment types.

The growing concerns regarding the impact of climate change have underscored the imperative to integrate climate effects into the analysis of all economic activities, including public policy. In our fourth research line, our objective is to devise a method for incorporating potential climate-change damages associated with public policies into the standard economic calculations typically employed to assess the overall impact of various forms of public spending.

We aim to study these themes through the lens of economic theory, complemented by rigorous quantitative analyses. This approach will enhance our understanding of the fundamental drivers behind these structural changes. Furthermore, it will facilitate an evaluation of the sustainability and social desirability of prevailing policies, while also providing insights into potentially effective strategies for managing and mitigating challenges associated with these transformations.