This paper analyzes the consequences of international factor movements on the skilled-unskilled wage inequality in a dual-economy set-up that includes unemployment and three intersectorally mobile factors of production-unskilled labor, skilled labor, and capital. Thus far, theoretical literature on this subject has adopted the full-employment framework and hence ignored the problem of unemployment. The analysis in this paper reveals that the results crucially depend on the difference in the intersectoral factor intensities between skilled labor and capital. In particular, it demonstrates the existence of a possibility of deterioration in wage inequality following foreign unskilled-labor inflow. © 2008 The Authors Journal compilation © 2008 Blackwell Publishing Ltd.

SARBAJIT CHOWDHURY

Economics

S YABUUCHI

University of Calcutta (informally known as Calcutta University or CU) is a collegiate public state university located in Kolkata, West Bengal, India.&nbsp;Within India it is recognized as a &quot;Five-Star University&quot; and accredited &quot;A&quot; Grade by National Assessment and Accreditation Council.

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The University of Calcutta has secured the Fifth position among the Universities of India in the prestigious &quot;Indian University Ranking 2019&quot; list, released by the NIRF of the Ministry of Human Resource Development, Government of India.

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It was established on 24 January 1857, and was one of the first institutions in Asia to be established as a multidisciplinary and Western-style university. Its alumni and faculty include several heads of state, heads of government, social reformers, prominent artists, only academy award winner and Dirac medal winner in India, many Fellows of the Royal Society and five Nobel laureates as of 2019 which is highest in South Asia.

University Of Calcutta

Review of International Economics

This paper is aimed at theoretically examining the consequence of the anti-immigration policy adopted in the destination country on the skilled-unskilled wage inequality in a source nation using a couple of two-sector, specific-factor general equilibrium models in both the presence and absence of unemployment. Emigration requires incurring some capital cost for professional skill formation on the part of every prospective emigrant that adds to the opportunity cost of emigration. The authority of the destination country determines the number of visas to be granted and hence directly controls the magnitude of skilled emigration from the source country. In the migration equilibrium, the expected skilled wage income abroad is equal to the opportunity cost of emigration. In both the presence and absence of unemployment of unskilled labor, the outcome of the policy on the wage inequality crucially hinges on both the magnitude of the fixed cost of emigration and the technological factors. In the specific-factor Harris-Todaro model, the degree of imperfection in the unskilled labor market is an additional factor. Finally, some policy recommendations have been made for protecting the interest of the poor unskilled workforce.

Economics and Politics

Anti-immigration policy in the destination country and skilled-unskilled wage inequality in a source economy with or without unemployment

The present paper develops a two-sector, specific factor general equilibrium framework for analyzing endogenous skill formation in a dynamic set-up and examining the consequence of a public subsidy policy on education on the skilled-unskilled wage inequality in a small open economy. It shows that given the technologies of production the policy produces a favorable impact on the wage inequality only in one of the two periods while producing an adverse consequence in the other. If the wage income inequality improves (deteriorates) in period 1 it worsens (ameliorates) in period 2 under the same sufficient conditions. The results are found to be more or less valid even in the presence of unemployment of unskilled labour. Finally, some composite policy recommendations have been suggested so that the relative wages always move in favor of the poorer section of the working population. © 2017 Elsevier Inc.

International Review of Economics and Finance

Can public subsidy on education necessarily improve wage inequality?

This paper argues that better prospect for exports induces firms to distinguish between high-quality workers and low-quality workers by providing an incentive wage. Thus, trade leads to an identification of labour quality, widening the wage gap between the high-quality (skilled) and the low-quality (unskilled) workers. The results are derived in a model containing both moral hazard and adverse selection problems. We provide a different argument from the ones as available in the existing literature including the standard Shapiro and Stiglitz (1984) shirking model. Finally, the results of the paper have some important policy implications. © 2017 Elsevier Inc.

International trade and quality of labour

This paper has developed a three-sector general equilibrium framework that explains unemployment of both skilled and unskilled labour. Unemployment of unskilled labour is of the Harris-Todaro (1970) type while unemployment of skilled labour is caused due to the validity of the FWH in the high-skill sector. There are two types of capital one of which is specific to the primary export sector while the other moves freely among the different sectors. Inflows of foreign capital of either type unambiguously improve the economic conditions of the unskilled working class. However, the effects on the skilled-unskilled wage inequality and the extent of unemployment of both types of labour crucially hinge on the properties implied by the efficiency function of the skilled workers. © 2009 Elsevier B.V. All rights reserved.

Fulltext

Economic Modelling

Foreign capital inflow, skilled-unskilled wage inequality and unemployment of unskilled labour in a fair wage model

This paper is purported to analyze the consequences of liberalized economic policies on the skilled-unskilled wage inequality in the developing countries using a three sector general equilibrium model reasonable for at least a few developing economies. The analysis of the paper has found that the wage inequality rises unambiguously due to a reduction of import tariff from the low-skill manufacturing sector. However, an inflow of foreign capital produces a favourable effect on the wage inequality under a reasonable factor intensity condition. Interestingly, contrary to the common wisdom, a policy of labour market reform may raise the competitive unskilled wage and improve wage inequality under reasonable condition. © 2006 Elsevier Inc. All rights reserved.

Economic liberalization and wage inequality in the presence of labour market imperfection

The paper develops a three sector general equilibrium structure with diverse trade pattern and imperfection in the unskilled labour market to analyze the consequences of international mobility of skilled and unskilled labour on the skilled-unskilled wage inequality in the developing economies. It shows that the effects of international migration of labour on the wage inequity crucially depend on both the relative capital intensities between the low-skill and high-skill sectors and the institutional nature of the markets for unskilled labour. The analysis finds that an emigration (immigration) of either type of labour is likely to produce a favourable (an unfavourable) effect on the wage inequality. In particular, the result of emigration (immigration) of skilled labour on the relative wage inequality is counterintuitive. These results have important policy implications for an overpopulated developing country like India. © 2006 Elsevier B.V. All rights reserved.

International migration of labour and skilled-unskilled wage inequality in a developing economy

In a two sector mobile capital Harris-Todaro model, such as [Corden, W.M., Findlay, R., 1975. Urban unemployment, intersectoral capital mobility, and development policy in a dual economy. Economica 42, 59-78], an inflow of foreign capital in the presence of protectionist policy is welfare deteriorating as well as unemployment accentuating. But, the developing countries have chosen liberalized investment and trade policies as their development strategies and have been able to attract a considerable amount of foreign capital during the last two decades. A relevant question is why these countries are yearning for foreign capital given its detrimental effects as predicted by the conventional theoretical literature on trade and development. This paper makes an attempt to address the above issue in terms of a three sector Harris-Todaro model with agricultural dualism and a non-traded final commodity. In the given setup, an inflow of foreign capital is likely to improve welfare and does not necessarily worsen the problem of unemployment. The paper may also be useful to explain as to why many of the developing economies have experienced 'jobless growth' in the liberalized regime. © 2005 Elsevier B.V. All rights reserved.

Japan and the World Economy

Foreign capital, welfare and urban unemployment in the presence of agricultural dualism

This paper purports to show that even in a 2 × 2 full-employment production structure, an inflow of foreign capital may be welfare improving in the presence of labour market distortion. However, the existence of labour market distortion is a necessity to obtain this unconventional result. If an inflow of foreign capital is accompanied by labour market reform, the possibility of welfare gain due to foreign capital diminishes. Therefore, there may exist a trade-off between the policies of growth with foreign capital and labour market reform. However, if the inflow of foreign capital is accompanied by a labour-augmenting type technology transfer, it is found that investment liberalization policy and labour market reform may be undertaken concurrently in a developing economy. © Blackwell Publishing Ltd and The University of Manchester, 2005.

Journal	Data powered by TypesetReview of International Economics
Publisher	Data powered by TypesetWILEY-BLACKWELL
ISSN	0965-7576