Yabuuchi, Shigemi and Chaudhuri, Sarbajit (2009): Skill Formation, Capital Adjustment Cost and Wage Inequality.
Download (257kB) | Preview
The paper employs a three-sector general equilibrium model for examining the consequences of an infrastructure development scheme to the education sector and an inflow of foreign capital on the skilled-unskilled wage inequality in a developing economy. The education sector faces a capital adjustment cost for which the effective unit cost of capital depends positively on the amount of capital employed. Although both infrastructure development scheme and inflows of foreign capital lead to higher skill formation, the policies produce incongruent effects on the wages of skilled and unskilled labour. Furthermore, the effects of the policies on the skilled-unskilled wage inequality depend crucially on the relative factor intensities of the low-skill and high-skill sectors. Finally, which of the two policies should the country adopt depends on the technological, institutional and trade related factors.
|Item Type:||MPRA Paper|
|Original Title:||Skill Formation, Capital Adjustment Cost and Wage Inequality|
|English Title:||Skill Formation, Capital Adjustment Cost and Wage Inequality|
|Keywords:||Skill formation, skilled labour, unskilled labour, wage inequality, foreign capital, capital adjustment cost|
|Subjects:||F - International Economics > F1 - Trade > F16 - Trade and Labor Market Interactions
F - International Economics > F1 - Trade > F13 - Trade Policy ; International Trade Organizations
J - Labor and Demographic Economics > J3 - Wages, Compensation, and Labor Costs > J31 - Wage Level and Structure ; Wage Differentials
|Depositing User:||Sarbajit Chaudhuri|
|Date Deposited:||05 Nov 2009 16:08|
|Last Modified:||08 Feb 2016 10:52|
Chau, N. and Stark, O. (1999): ‘Migration under asymmetric information and human capital formation,’ Review of International Economics 7(3), 455-483.
Chaudhuri, S. and Yabuuchi S. (2007): ‘Economic liberalization and wage inequality in the presence of labour market imperfection’, International Review of Economics and Finance 16, 592-603.
Fan, C. Simon, and Oded Stark (2007): ‘International migration and “educated unemployment”,’ Journal of Development Economics 83, 76-87.
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, , MA: MIT Press.
Jones, R.W. and Neary, P. (1984): ‘Positive theory of international trade’, in Jones, R.W. and P. B. Kenen (eds.), Handbook of Development Economics Vol. 1, North-Holland, 1-62.
Kar, S. and Beladi, H. (2004): ‘Skill formation and international migration: welfare perspective of developing countries’, Japan and the World Economy 16, 35-54.
Marjit, S., Beladi, H. and A. Chakrabarti, (2004): ‘Trade and wage inequality in developing countries’. Economic Inquiry 42, 295-303.
Marjit, S. and Acharyya, R. (2003): International Trade, Wage Inequality and the Developing Countries: A General Equilibrium Approach. Heidelberg: Physica/Springer Verlag.
Sharma, K. (2007): ‘FDI in higher education : aspirations and reality’, Mainstream 45(25).
Stark, O. et al. (1998): ‘Human capital depletion, human capital formation and migration: a blessing or a curse’,’ Economics Letters 60(3), 363-367.