On the Effects of Skill Upgrading in the Presence of Spatial Labor Market Frictions: An Agent-Based Analysis of Spatial Policy Design

We report results of economic policy experiments carried out in the framework of the EURACE agent-based macroeconomic model featuring a distinct geographical dimension and heterogeneous workers with respect to skill types. Using a calibrated model able to replicate a range of stylized facts of goods and labor markets, it is examined in how far effects differ if policy measures aiming at an improvement of general skills are uniformly spread over all regions in the economy or focused in one particular region. We find that it depends on the level of spatial frictions on the labor market how the spatial distribution of policy measures affects the effects of the policy. Furthermore, we show that a reduction in spatial frictions does not necessarily improve the growth of output and household income.