Endogenous skill formation, foreign capital and education subsidy in a dual economy

Chaudhuri, Sarbajit and Bandopadhyay, Titas Kumar (2012): Endogenous skill formation, foreign capital and education subsidy in a dual economy.

Abstract

The present paper develops a three sector Harris-Todaro (1970) type general equilibrium model of unemployment by incorporating endogenous skill formation. Two types of labour are considered: skilled labour and un-skilled labour. We examine the effects of the inflows of foreign capital on the level of unskilled unemployment and skilled-unskilled wage inequality. We find that an inflow of foreign capital raises the skilled- unskilled wage gap and lowers the level of unemployment of the unskilled labour.

• Item Type: MPRA Paper
• Language: English
• Keywords: skill formation, foreign capital, education subsidy, wage inequality, unemployment
• Subjects: F - International Economics > F1 - Trade > F13 - Trade Policy ; International Trade Organizations; J - Labor and Demographic Economics > J4 - Particular Labor Markets > J41 - Labor Contracts; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O15 - Human Resources ; Human Development ; Income Distribution ; Migration; J - Labor and Demographic Economics > J6 - Mobility, Unemployment, Vacancies, and Immigrant Workers > J64 - Unemployment: Models, Duration, Incidence, and Job Search

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