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Rising wage inequality in developing economies: Privatization and competition

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Author Info

  • Chi-Chur Chao
  • Bharat Hazari
  • Eden Yu

Abstract

Using a dual structure depicting a developing economy, this paper shows that increased partial privatization or foreign competition can lead to wage inequality between skilled and unskilled labor. In addition, rising wage inequality can be triggered by inflows of unskilled labor or outflows of skilled labor and/or capital. Further, partial privatization or foreign competition reduces the urban output, thereby raising the goods price and unemployment ratio. These effects lower social welfare of the economy.

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File URL: http://www.tandfonline.com/doi/abs/10.1080/09638190600871719
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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal The Journal of International Trade & Economic Development.

Volume (Year): 15 (2006)
Issue (Month): 3 ()
Pages: 375-385

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Handle: RePEc:taf:jitecd:v:15:y:2006:i:3:p:375-385

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Related research

Keywords: Wage inequality; privatization; competition; developing economies;

References

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  1. 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.
  2. J Peter Neary, 2001. "Foreign Competition and Wage Inequality," Working Papers 200102, School Of Economics, University College Dublin.
  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. Paul H. Malatesta & Kathryn L. DeWenter, 2001. "State-Owned and Privately Owned Firms: An Empirical Analysis of Profitability, Leverage, and Labor Intensity," American Economic Review, American Economic Association, vol. 91(1), pages 320-334, March.
  5. Feenstra, Robert C. & Hanson, Gordon H., 1997. "Foreign direct investment and relative wages: Evidence from Mexico's maquiladoras," Journal of International Economics, Elsevier, vol. 42(3-4), pages 371-393, May.
  6. Adrian Wood, 1995. "How Trade Hurt Unskilled Workers," Journal of Economic Perspectives, American Economic Association, vol. 9(3), pages 57-80, Summer.
  7. Donald R. Davis, 1996. "Technology, Unemployment, and Relative Wages in a Global Economy," NBER Working Papers 5636, National Bureau of Economic Research, Inc.
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Cited by:
  1. Mandal, Biswajit & Marjit, Sugata, 2010. "Corruption and wage inequality?," International Review of Economics & Finance, Elsevier, vol. 19(1), pages 166-172, January.

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