IDEAS home Printed from https://ideas.repec.org/a/eee/ecmode/v39y2014icp174-181.html
   My bibliography  Save this article

The impacts of education investment on skilled–unskilled wage inequality and economic development in developing countries

Author

Listed:
  • Pan, Lijun

Abstract

Four-sector general equilibrium models are established to investigate the impacts of increased governmental investment in education capital on skilled–unskilled wage inequality and economic development. The basic model, which assumes perfect competition in the producer services sector, shows that increased education capital investment from the government will unambiguously reduce skilled–unskilled wage inequality and conditionally promote economic development. Then the robustness of the basic model is substantiated by the extended model that incorporates the monopolistically competitive feature of the producer services sector.

Suggested Citation

  • Pan, Lijun, 2014. "The impacts of education investment on skilled–unskilled wage inequality and economic development in developing countries," Economic Modelling, Elsevier, vol. 39(C), pages 174-181.
    • Handle: RePEc:eee:ecmode:v:39:y:2014:i:c:p:174-181
    DOI: 10.1016/j.econmod.2014.02.040
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0264999314000844
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.econmod.2014.02.040?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. DiNardo, John & Fortin, Nicole M & Lemieux, Thomas, 1996. "Labor Market Institutions and the Distribution of Wages, 1973-1992: A Semiparametric Approach," Econometrica, Econometric Society, vol. 64(5), pages 1001-1044, September.
    2. Wood, Adrian, 1997. "Openness and Wage Inequality in Developing Countries: The Latin American Challenge to East Asian Conventional Wisdom," The World Bank Economic Review, World Bank, vol. 11(1), pages 33-57, January.
    3. Shigemi Yabuuchi & Sarbajit Chaudhuri, 2009. "Skill Formation, Capital Adjustment Cost And Wage Inequality," Review of Urban & Regional Development Studies, Wiley Blackwell, vol. 21(1), pages 2-13, March.
    4. Chaudhuri, Sarbajit & Banerjee, Dibyendu, 2008. "Fair Wage Hypothesis, International Factor Mobility and Skilled-Unskilled Wage Inequality in a Developing Economy," MPRA Paper 9303, University Library of Munich, Germany.
    5. Xu, Bin, 2001. "Factor bias, sector bias, and the effects of technical progress on relative factor prices," Journal of International Economics, Elsevier, vol. 54(1), pages 5-25, June.
    6. Funatsu, Hideki, 1988. "A Note on the Stability of the Harris-Todaro Model with Capital Mobility," Economica, London School of Economics and Political Science, vol. 55(217), pages 119-121, February.
    7. 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.
    8. Lam, Kit-Chun & Liu, Pak-Wai, 2011. "Increasing dispersion of skills and rising earnings inequality," Journal of Comparative Economics, Elsevier, vol. 39(1), pages 82-91, March.
    9. Anwar, Sajid, 2006. "Factor mobility and wage inequality in the presence of specialisation-based external economies," Economics Letters, Elsevier, vol. 93(1), pages 88-93, October.
    10. Markusen, James R, 1989. "Trade in Producer Services and in Other Specialized Intermediate Inputs," American Economic Review, American Economic Association, vol. 79(1), pages 85-95, March.
    11. Saibal Kar & Basudeb Guha‐Khasnobis, 2006. "Economic Reform, Skill Formation and Foreign Capital," The World Economy, Wiley Blackwell, vol. 29(1), pages 79-94, January.
    12. Pan, Lijun & Zhou, Yu, 2013. "International factor mobility, environmental pollution and skilled–unskilled wage inequality in developing countries," Economic Modelling, Elsevier, vol. 33(C), pages 826-831.
    13. Sugata Marjit & Hamid Beladi & Avik Chakrabarti, 2004. "Trade and Wage Inequality in Developing Countries," Economic Inquiry, Western Economic Association International, vol. 42(2), pages 295-303, April.
    14. Das, Satya P., 2002. "Foreign direct investment and the relative wage in a developing economy," Journal of Development Economics, Elsevier, vol. 67(1), pages 55-77, February.
    15. Chaudhuri, Sarbajit & Yabuuchi, Shigemi, 2007. "Economic liberalization and wage inequality in the presence of labour market imperfection," International Review of Economics & Finance, Elsevier, vol. 16(4), pages 592-603.
    16. Sajid Anwar, 2010. "Wage Inequality, Increased Competition, and Trade Liberalization: Short Run vs Long Run," Review of International Economics, Wiley Blackwell, vol. 18(3), pages 574-581, August.
    17. 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.
    18. Reza Oladi & John Gilbert & Hamid Beladi, 2011. "Foreign Direct Investment, Non‐Traded Goods And Real Wages," Pacific Economic Review, Wiley Blackwell, vol. 16(1), pages 36-41, February.
    19. Mandal, Biswajit & Marjit, Sugata, 2010. "Corruption and wage inequality?," International Review of Economics & Finance, Elsevier, vol. 19(1), pages 166-172, January.
    20. Mehta, Aashish & Hasan, Rana, 2012. "The effects of trade and services liberalization on wage inequality in India," International Review of Economics & Finance, Elsevier, vol. 23(C), pages 75-90.
    21. Anwar, Sajid, 1998. "Government Size, Product Diversity and International Trade," Journal of Policy Modeling, Elsevier, vol. 20(1), pages 1-9, February.
    22. Gupta, Manash Ranjan & Dutta, Priya Brata, 2010. "Skilled-unskilled wage inequality, nontraded good and endogenous supply of skilled labour: A theoretical analysis," Economic Modelling, Elsevier, vol. 27(5), pages 923-934, September.
    23. Fang, Chen-ray & Huang, Li-hsuan & Wang, Ming-cheng, 2008. "Technology spillover and wage inequality," Economic Modelling, Elsevier, vol. 25(1), pages 137-147, January.
    24. Azizur Rahman Khan, 1998. "The Impact of Globalization on South Asia," Palgrave Macmillan Books, in: A. S. Bhalla (ed.), Globalization, Growth and Marginalization, chapter 4, pages 103-124, Palgrave Macmillan.
    25. Beladi, Hamid & Marjit, Sugata & Broll, Udo, 2011. "Capital mobility, skill formation and polarization," Economic Modelling, Elsevier, vol. 28(4), pages 1902-1906, July.
    26. Kar, Saibal & Beladi, Hamid, 2004. "Skill formation and international migration: welfare perspective of developing countries," Japan and the World Economy, Elsevier, vol. 16(1), pages 35-54, January.
    27. Wang, Ming-cheng & Fang, Chen-ray & Huang, Li-hsuan, 2009. "International knowledge spillovers and wage inequality in developing countries," Economic Modelling, Elsevier, vol. 26(6), pages 1208-1214, November.
    28. Marjit, Sugata & Kar, Saibal, 2005. "Emigration and wage inequality," Economics Letters, Elsevier, vol. 88(1), pages 141-145, July.
    29. Hamid Beladi & Avik Chakrabarti & Sugata Marjit, 2010. "Skilled‐Unskilled Wage Inequality And Urban Unemployment," Economic Inquiry, Western Economic Association International, vol. 48(4), pages 997-1007, October.
    30. Mark P. Moore & Priya Ranjan, 2005. "Globalisation vs Skill-Biased Technological Change: Implications for Unemployment and Wage Inequality," Economic Journal, Royal Economic Society, vol. 115(503), pages 391-422, April.
    31. Donald J. Robbins, 1996. "Evidence on Trade and Wages in the Developing World," OECD Development Centre Working Papers 119, OECD Publishing.
    32. Ethier, Wilfred J., 2005. "Globalization, globalisation: Trade, technology, and wages," International Review of Economics & Finance, Elsevier, vol. 14(3), pages 237-258.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Pengqing Zhang, 2019. "Skill formation, environmental pollution, and wage inequality," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 62(2), pages 405-424, April.
    2. Yeo, Yeongjun & Lee, Jeong-Dong, 2020. "Revitalizing the race between technology and education: Investigating the growth strategy for the knowledge-based economy based on a CGE analysis," Technology in Society, Elsevier, vol. 62(C).
    3. Pan, Zheng & Lien, Donald & Wang, Hao, 2022. "Peer effects and shadow education," Economic Modelling, Elsevier, vol. 111(C).
    4. Lanaspa, Luis & Sanz-Gracia, Fernando & Vera-Cabello, María, 2016. "The (strong) interdependence between intermediate producer services' attributes and manufacturing location," Economic Modelling, Elsevier, vol. 57(C), pages 1-12.
    5. Mishra, Vinod & Smyth, Russell, 2015. "Estimating returns to schooling in urban China using conventional and heteroskedasticity-based instruments," Economic Modelling, Elsevier, vol. 47(C), pages 166-173.
    6. Ujjaini Mukhopadhyay, 2021. "Differential Education Subsidy Policy and Wage Inequality Between Skilled, Semi-skilled and Unskilled Labour: A General Equilibrium Approach," Review of Development and Change, , vol. 26(1), pages 40-62, June.
    7. Elisabete Nogueira & Sofia Gomes & João M. Lopes, 2022. "The Key to Sustainable Economic Development: A Triple Bottom Line Approach," Resources, MDPI, vol. 11(5), pages 1-18, May.
    8. Annie Tubadji & Vassilis Angelis & Peter Nijkamp, 2016. "Endogenous intangible resources and their place in the institutional hierarchy," Review of Regional Research: Jahrbuch für Regionalwissenschaft, Springer;Gesellschaft für Regionalforschung (GfR), vol. 36(1), pages 1-28, February.
    9. Peng, Langchuan & Wang, Xi & Ying, Shanshan, 2020. "The heterogeneity of beauty premium in China: Evidence from CFPS," Economic Modelling, Elsevier, vol. 90(C), pages 386-396.
    10. Pi, Jiancai & Chen, Xuyang, 2016. "The impacts of capital market distortion on wage inequality, urban unemployment, and welfare in developing countries," International Review of Economics & Finance, Elsevier, vol. 42(C), pages 103-115.
    11. Jung, Sungmoon & Lee, Jeong-Dong & Hwang, Won-Sik & Yeo, Yeongjun, 2017. "Growth versus equity: A CGE analysis for effects of factor-biased technical progress on economic growth and employment," Economic Modelling, Elsevier, vol. 60(C), pages 424-438.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Pi, Jiancai & Zhou, Yu, 2013. "Institutional quality and skilled–unskilled wage inequality," Economic Modelling, Elsevier, vol. 35(C), pages 356-363.
    2. Jiancai Pi & Yu Zhou, 2015. "The impacts of corruption on wage inequality and rural–urban migration in developing countries," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 54(3), pages 753-768, May.
    3. Pi, Jiancai & Zhou, Yu, 2014. "Foreign capital, public infrastructure, and wage inequality in developing countries," International Review of Economics & Finance, Elsevier, vol. 29(C), pages 195-207.
    4. Pan, Lijun & Zhou, Yu, 2013. "International factor mobility, environmental pollution and skilled–unskilled wage inequality in developing countries," Economic Modelling, Elsevier, vol. 33(C), pages 826-831.
    5. Manash Ranjan Gupta & Priya Brata Dutta, 2018. "Skilled-unskilled wage inequality and structural transformation in a dual economy," Indian Economic Review, Springer, vol. 53(1), pages 311-332, December.
    6. Zhang, Jingjing, 2013. "Factor mobility and skilled–unskilled wage inequality in the presence of internationally traded product varieties," Economic Modelling, Elsevier, vol. 30(C), pages 579-585.
    7. Pi, Jiancai & Zhang, Pengqing, 2017. "Foreign capital, pollution control, and wage inequality in developing countries," International Review of Economics & Finance, Elsevier, vol. 48(C), pages 280-288.
    8. Priya Brata Dutta & Nirjhar Ghosh, 2021. "Wage Inequality and Unemployment in the Presence of Imported Intermediate Goods: A Theoretical Analysis," Foreign Trade Review, , vol. 56(4), pages 375-399, November.
    9. Gupta, Manash Ranjan & Dutta, Priya Brata, 2011. "Skilled-unskilled wage inequality and unemployment: A general equilibrium analysis," Economic Modelling, Elsevier, vol. 28(4), pages 1977-1983, July.
    10. Pi, Jiancai & Zhou, Yu & Yin, Jun, 2013. "International factor mobility, monopolistic competition, and wage inequality," Economic Modelling, Elsevier, vol. 33(C), pages 326-332.
    11. Gupta, Manash Ranjan & Dutta, Priya Brata, 2012. "Skilled–unskilled wage inequality, product variety, public input and increasing returns: A static general equilibrium analysis," Economic Modelling, Elsevier, vol. 29(2), pages 502-513.
    12. Pi, Jiancai & Zhou, Yu, 2012. "Public infrastructure provision and skilled–unskilled wage inequality in developing countries," Labour Economics, Elsevier, vol. 19(6), pages 881-887.
    13. Chaudhuri, Sarbajit & Ghosh, Arnab & Banerjee, Dibyendu, 2018. "Can public subsidy on education necessarily improve wage inequality?," International Review of Economics & Finance, Elsevier, vol. 54(C), pages 165-177.
    14. Sun, Sizhong & Anwar, Sajid, 2015. "Taxation of labour, product varieties and skilled–unskilled wage inequality: Short run versus long run," International Review of Economics & Finance, Elsevier, vol. 38(C), pages 250-257.
    15. Kuo‐Hsing Kuo & Shang‐Fen Wu & Cheng‐Te Lee, 2022. "The impact of environmental policy on wage inequality," International Journal of Economic Theory, The International Society for Economic Theory, vol. 18(4), pages 472-485, December.
    16. Gupta, Manash Ranjan & Dutta, Priya Brata, 2010. "Skilled-unskilled wage inequality: A general equilibrium analysis," Research in Economics, Elsevier, vol. 64(4), pages 247-263, December.
    17. Gupta Manash Ranjan & Dutta Priya Brata, 2014. "Skilled-Unskilled Wage Inequality, Growth of Skilled Labour and Development Policies," Journal of Globalization and Development, De Gruyter, vol. 5(1), pages 1-26, June.
    18. Gupta, Manash Ranjan & Dutta, Priya Brata, 2010. "Skilled-unskilled wage inequality, nontraded good and endogenous supply of skilled labour: A theoretical analysis," Economic Modelling, Elsevier, vol. 27(5), pages 923-934, September.
    19. Anwar, Sajid & Rice, John, 2009. "Labour mobility and wage inequality in the presence of endogenous foreign investment," Economic Modelling, Elsevier, vol. 26(6), pages 1135-1139, November.
    20. Priya Brata Dutta, 2014. "Skilled-unskilled wage inequality, product variety and unemployment: A static general equilibrium analysis," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 23(1), pages 31-55, February.

    More about this item

    Keywords

    Education Investment; Skilled–unskilled wage inequality; Economic development; General equilibrium model;
    All these keywords.

    JEL classification:

    • H52 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Education
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ecmode:v:39:y:2014:i:c:p:174-181. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/30411 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.