Chaudhuri, Sarbajit and Yabuuchi, Shigemi (2007): Foreign Capital and Skilled-unskilled Wage Inequality in a Developing Economy with Non-traded Goods.
Download (255Kb) | Preview
The existing theoretical literature does not take into consideration the existence of non-traded goods and the nature of capital mobility between the traded and the non-traded sectors in analyzing the consequences of liberalized investment policies on the relative wage inequality in the developing countries. The present paper purports to fill in this gap using two four-sector general equilibrium models reasonable for a developing economy. We have found that inflows of foreign capital usually improve the wage inequality when the low-skill sector is capital-intensive. But, the relative wage gap may widen if the high-skill sector is capital-intensive. When the non-traded sector produces a non-traded final commodity wage inequality worsens if the low-skill sector is capital-intensive and employs only a very small proportion of the unskilled workforce and if the primary export sector is unskilled labour-intensive. Appropriate policy recommendations for improving the wage inequality have also been made.
|Item Type:||MPRA Paper|
|Original Title:||Foreign Capital and Skilled-unskilled Wage Inequality in a Developing Economy with Non-traded Goods|
|Keywords:||Skilled labour; unskilled labour; wage inequality; foreign capital inflows; non-traded goods; intersectoral capital mobility; labour market imperfection|
|Subjects:||F - International Economics > F2 - International Factor Movements and International Business > F21 - International Investment; Long-Term Capital Movements|
|Depositing User:||Sarbajit Chaudhuri|
|Date Deposited:||09. Apr 2007|
|Last Modified:||18. Feb 2013 09:43|
Bardhan, P.K., 1973. A model of growth of capitalism in a dual agrarian economy, in: Bhagwati, J.M., Eckaus, R.S. (Eds.), Development and Planning: Essays in Honour of Paul Rosenstein-Rodan. USA, MIT Press. Bhalotra, S. (2002): The Impact of Economic Liberalization on Employment and Wages in India, ILO, Geneva. Beyer, H., Rojas, P. and R. Vergara (1999): Trade liberalization and wage inequality, Journal of Development Economics 59, 103-123. Brecher, R. A. and C. F. Diaz Alejandro (1977): Tariffs, Foreign Capital and Immiserizing Growth, Journal of International Economics 7, 317–22. Chaudhuri, S. (2003): How and How Far to Liberalize a Developing Economy with Informal Sector and Factor Market Distortions, Journal of International Trade and Economic Development, 12, 403-428. Chandra, V. and M. A. Khan (1993): Foreign Investment in the Presence of an Informal Sector, Economica 60, 79–103. Chao, C. C. and E. S. H. Yu (1994): Foreign Capital Inflow and Welfare in an Economy with Imperfect Competition, Journal of Development Economics 45, 141-154. Chaudhuri, S. (2007): Foreign capital, welfare and unemployment in the presence of agricultural dualism, Japan and the World Economy 19(2), 149-165. Chaudhuri, S. and S. Yabuuchi (2006): Economic Liberalization and Wage Inequality in the Presence of Labour market imperfection, International Review of Economics and Finance, forthcoming. Chaudhuri, S., S. Yabuuchi and U. Mukhopadhyay (2006): Inflow of Foreign Capital and Trade Liberalization in a Model with an Informal Sector and Urban Unemployment, Pacific Economic Review 11, 87-103. Currie, J. and A. Harrison (1997): Sharing the Costs: The Impact of Trade Reform on Capital and Labor in Morocco, Journal of Labour Economics 15(3), S44-S71. Feenstra, R.C. and Hanson, G.H. (1996): Foreign investment, outsourcing and relative wages, in R. Feenstra, G. Grossman and D. Irwin (eds.), Political Economy of Trade Policies: Essays in Honor of J. N. Bhagwati, Cambridge, MIT Press, MA. Hanson, G.H. and A. Harrison (1999): Trade Liberalization and Wage Inequality in Mexico, Industrial and Labour Relations Review, 52(2), 271-288. Harrison, A. and G. Hanson (1999): Who gains from trade reform? Some remaining puzzles, Journal of Development Economics, 59(1): 125-154. Jones, R.W. and Neary, P. (1984): Positive Theory of International Trade, Jones, R.W. and P. B. Kenen (eds.), Handbook of Development Economics Vol. 1, North-Holland, 1-62. Khan, A.R. (1982): Tariffs, Foreign Capital and Immiserizing Growth with Urban Unemployment and Specific Factors of Production, Journal of Development Economics 10, 245–56. Khan, A.R. (1998): The Impact of Globalization in South Asia, in A.S. Bhalla (ed.), Globalization,Growth and Marginalization, Macmillan. Marjit, S. (2003): Economic reform and informal wage a general equilibrium analysis, Journal of Development Economics 72, 371-378. Marjit, S., Beladi, H. and A. Chakrabarti, (2004): Trade and Wage Inequality in Developing Countries, Economic Inquiry 42, 295-303. Robbins, D. (1994): Malaysian Wage Structure and its Causes’, Harvard Institute for International Development (HIID). Robbins, D. (1995): Trade, Trade Liberalization and Inequality in Latin America and East Asia: Synthesis of Seven Country Studies, HIID. Robbins, D. (1996): HOS Hits Facts: Facts Win: Evidence on Trade and Wages in Developing World, HIID. Tendulkar, S., Sundaram, D.K. and Jain, L.R. (1996): Macroeconomic Policies and Poverty in India 1966-67 to 1993-94, manuscript, ILO, New Delhi. UNCTAD Report (2005): http://stats.unctad.org/fdi/ReportFolders/ReportFolders.aspx Wood, A., (1997): Openness and Wage Inequality in Developing Countries: the Latin American challenge to East Asian conventional wisdom, World Bank Research Observer, 11(1), 33-57 Yabuuchi, S. (1982): A Note on Tariff-Induced Capital Inflow and Immiserization in the Presence of Taxation of Foreign Profits, Journal of International Economics 12, 183-189. Yabuuchi S. and S. Chaudhuri (2007): International Migration of Labour and Skilled-Unskilled wage Inequality in a Developing Economy, Economic Modelling 24(1), 128-137.