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Can International Factor Mobility Reduce Wage Inequality in a Dual Economy?

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  • Hamid Beladi
  • Sarbajit Chaudhuri
  • Shigemi Yabuuchi

Abstract

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.

Suggested Citation

  • Hamid Beladi & Sarbajit Chaudhuri & Shigemi Yabuuchi, 2008. "Can International Factor Mobility Reduce Wage Inequality in a Dual Economy?," Review of International Economics, Wiley Blackwell, vol. 16(5), pages 893-903, November.
    • Handle: RePEc:bla:reviec:v:16:y:2008:i:5:p:893-903
    DOI: 10.1111/j.1467-9396.2008.00751.x
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    References listed on IDEAS

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    1. Robbins, Donald J., 1996. "Hos Hits Facts: Facts Win Evidence On Trade And Wages In The Developing World," Harvard Institute for International Development (HIID) Papers 294374, Harvard University, Kennedy School of Government.
    2. Donald J. Robbins, 1996. "Evidence on Trade and Wages in the Developing World," OECD Development Centre Working Papers 119, OECD Publishing.
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