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International Capital Flow, Vanishing Industries and Two‐sided Wage Inequality
Author(s) -
Marjit Sugata,
Kar Saibal
Publication year - 2013
Publication title -
pacific economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.34
H-Index - 33
eISSN - 1468-0106
pISSN - 1361-374X
DOI - 10.1111/1468-0106.12041
Subject(s) - economics , impossibility , capital (architecture) , wage inequality , inequality , wage , labour economics , capital flows , market economy , liberalization , mathematical analysis , mathematics , archaeology , political science , law , history
This paper shows that international capital flow can lead to a rise in the relative wage between skilled and unskilled workers simultaneously in both capital‐exporting and capital‐importing nations. The impossibility of two‐sided wage inequality as an outcome of exogenous shocks has been previously discussed in the literature. We argue that such a result is highly probable when some industries vanish following changes in factor prices as a consequence of factor flows. The asymmetry in the nature of finite changes is the critical factor.