Premium
Labor Inflow Induced Wage Inequality and Public Infrastructure
Author(s) -
Anwar Sajid
Publication year - 2008
Publication title -
review of development economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.531
H-Index - 50
eISSN - 1467-9361
pISSN - 1363-6669
DOI - 10.1111/j.1467-9361.2008.00453.x
Subject(s) - economics , wage , inflow , labour economics , inequality , wage inequality , public infrastructure , labor mobility , general equilibrium theory , microeconomics , mathematical analysis , physics , mathematics , political science , mechanics , law
By making use of a simple general equilibrium model of a small open economy, the author examines the link between labor mobility and the size of wage inequality in the presence of productive public infrastructure. The paper shows that the provision of public infrastructure plays an important part in determining the size of labor inflow induced wage inequality. Specifically, it shows that, irrespective of the relative factor intensities, a small inflow of either skilled or unskilled labor does not affect the size of wage inequality if private industries derive equal benefits from public infrastructure provision. A small inflow of skilled (unskilled) labor increases (decreases) wage inequality if skilled (unskilled) labor intensive industry derives more benefits from public infrastructure.