A North-South Agent–Based Model of segmented labor markets: the role of education and trade asymmetries.

This article develops a two-country North-South Agent-Based Model (ABM) based on the labor-augmented K+S framework to analyze how asymmetries in public education expenditure affect technological capabilities, segmented labor markets, and growth patterns within a currency union. The model differentiates a leader (North) and a laggard (South) country solely by their education investment levels, which shape workers' qualifications across primary, secondary, and tertiary levels, influencing labor market segmentation and firms' innovation and imitation capacities. Results show persistent North-South divergences in GDP, productivity, unemployment (especially among lower-educated workers), and trade balances, with the South technologically dependent on imported capital goods and unable to catch up through international imitation alone. Policy experiments indicate that increasing education expenditure in the laggard country reduces unemployment and inequality but does not eliminate trade imbalances, highlighting the importance of internal capability development over reliance on external imitation for convergence. The model's design and findings provide insights into the interplay of education, technology trade, and labor market structures in shaping economic divergence and convergence dynamics.