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Can International Factor Mobility Reduce Wage Inequality in a Dual Economy? *
Author(s) -
Beladi Hamid,
Chaudhuri Sarbajit,
Yabuuchi Shigemi
Publication year - 2008
Publication title -
review of international economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.513
H-Index - 58
eISSN - 1467-9396
pISSN - 0965-7576
DOI - 10.1111/j.1467-9396.2008.00751.x
Subject(s) - economics , unemployment , dual economy , labour economics , capital (architecture) , wage inequality , inequality , dual (grammatical number) , wage , full employment , factors of production , production (economics) , economic system , macroeconomics , art , mathematical analysis , mathematics , archaeology , literature , history
This paper analyzes the consequences of international factor movements on the skilled–unskilled wage inequality in a dual‐economy set‐up that includes unemployment and three intersectorally mobile factors of production—unskilled labor, skilled labor, and capital. Thus far, theoretical literature on this subject has adopted the full‐employment framework and hence ignored the problem of unemployment. The analysis in this paper reveals that the results crucially depend on the difference in the intersectoral factor intensities between skilled labor and capital. In particular, it demonstrates the existence of a possibility of deterioration in wage inequality following foreign unskilled‐labor inflow.