Munich Personal RePEc Archive

Skills Distribution, Migration and Wage Differences in Pure Service-Exchange Economy

Gupta, Abhay (2007): Skills Distribution, Migration and Wage Differences in Pure Service-Exchange Economy.

[img]
Preview
PDF
MPRA_paper_9000.pdf

Download (169kB) | Preview

Abstract

This paper considers an economy with skilled agents exchanging their services. Using Cobb-Douglas preferences, the paper shows that there exists an optimal (average welfare maximizing) skills' distribution. This optimal distribution is independent of productivity and is welfare equalizing.

If the skill-distribution is not optimal, then some agents are better-off than others. In such a scenario, migration in some sectors is average-welfare improving while inviting skilled-agents in others reduces average welfare.

"Productivity increase of worse-o sector" without changing the overall skills' composition of economy increases the wage gap.

UB_LMU-Logo
MPRA is a RePEc service hosted by
the Munich University Library in Germany.