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Wage Inequality, Increased Competition, and Trade Liberalization: Short Run vs Long Run

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  • Sajid Anwar

Abstract

This paper examines the impact of increased competition and trade liberalization on skilled-unskilled wage inequality in the short run as well as the long run. It is shown that an increase in the number of firms in the producer services sector increases wage inequality in the short run even if the income shares of capital in the industrial and agricultural sectors were identical. A decrease in the services sector's fixed cost decreases wage inequality in the short run if the income share of capital in the agricultural sector is relatively large. Owing to the presence of external economies, a decrease in the services sector's fixed cost increases wage inequality in the long run. A decrease in import duty on the agricultural good increases wage inequality in the short as well as the long run but its effect in the long run is stronger due to the presence of external economies in the industrial sector. Copyright � 2010 Blackwell Publishing Ltd.

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Review of International Economics.

Volume (Year): 18 (2010)
Issue (Month): 3 (08)
Pages: 574-581

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Handle: RePEc:bla:reviec:v:18:y:2010:i:3:p:574-581

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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0965-7576

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Cited by:
  1. Zhang, Jingjing, 2012. "Inflow of labour, producer services and wage inequality," Economics Letters, Elsevier, vol. 117(3), pages 600-603.
  2. Pi, Jiancai & Zhou, Yu & Yin, Jun, 2013. "International factor mobility, monopolistic competition, and wage inequality," Economic Modelling, Elsevier, vol. 33(C), pages 326-332.
  3. Anwar, Sajid & Sun, Sizhong & Valadkhani, Abbas, 2013. "International outsourcing of skill intensive tasks and wage inequality," Economic Modelling, Elsevier, vol. 31(C), pages 590-597.
  4. Anwar, Sajid & Sun, Sizhong, 2012. "Trade liberalisation, market competition and wage inequality in China's manufacturing sector," Economic Modelling, Elsevier, vol. 29(4), pages 1268-1277.

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