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Downsizing, wage inequality and welfare in a developing economy

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  • Beladi, Hamid
  • Chao, Chi-Chur

Abstract

This paper focuses on the cost cutting effects of firm downsizing in a developing economy. Using a dualistic production structure to depict a developing economy, the impacts of downsizing on wage inequality and social welfare are examined. Downsizing is revealed to not only narrow the wage gap between skilled and unskilled labor but also to raise the level of manufactured output and reduce the unemployment ratio in the urban sector. These effects improve the social welfare of the economy.

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Bibliographic Info

Article provided by Elsevier in its journal Research in Economics.

Volume (Year): 64 (2010)
Issue (Month): 4 (December)
Pages: 224-228

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Handle: RePEc:eee:reecon:v:64:y:2010:i:4:p:224-228

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Web page: http://www.elsevier.com/locate/inca/622941

Related research

Keywords: Downsizing Wage inequality Unemployment;

References

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  1. Neary, J Peter, 2002. "Foreign Competition and Wage Inequality," CEPR Discussion Papers 3420, C.E.P.R. Discussion Papers.
  2. Francois, Joseph & Nelson, Doug R, 1998. "Trade, Technology and Wages: General Equilibrium Mechanics," CEPR Discussion Papers 1919, C.E.P.R. Discussion Papers.
  3. 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.
  4. Harris, John R & Todaro, Michael P, 1970. "Migration, Unemployment & Development: A Two-Sector Analysis," American Economic Review, American Economic Association, vol. 60(1), pages 126-42, March.
  5. Gilbert, John & Oladi, Reza, 2009. "Capital specificity, imperfect labor mobility and growth in developing economies," International Review of Economics & Finance, Elsevier, vol. 18(1), pages 113-122, January.
  6. Ronald W. Jones, 1965. "The Structure of Simple General Equilibrium Models," Journal of Political Economy, University of Chicago Press, vol. 73, pages 557.
  7. Walde, Klaus & Wei[ss], Pia, 2007. "International competition, downsizing and wage inequality," Journal of International Economics, Elsevier, vol. 73(2), pages 396-406, November.
  8. Feenstra, Robert C & Hanson, Gordon H, 1996. "Globalization, Outsourcing, and Wage Inequality," American Economic Review, American Economic Association, vol. 86(2), pages 240-45, May.
  9. Donald R. Davis, 1996. "Technology, Unemployment, and Relative Wages in a Global Economy," NBER Working Papers 5636, National Bureau of Economic Research, Inc.
  10. Anwar, Sajid, 2009. "Wage inequality, welfare and downsizing," Economics Letters, Elsevier, vol. 103(2), pages 75-77, May.
  11. Chakrabarti, Avik, 2009. "Internal adjustment costs in capital-intensive and labor-intensive industries," Economics Letters, Elsevier, vol. 102(2), pages 76-77, February.
  12. Adrian Wood, 1995. "How Trade Hurt Unskilled Workers," Journal of Economic Perspectives, American Economic Association, vol. 9(3), pages 57-80, Summer.
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