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Foreign Capital Inflow, Skilled-Unskilled Wage Inequality and Unemployment of Unskilled Labour in a Fair Wage Model

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Author Info
Chaudhuri, Sarbajit
Banerjee, Dibyendu

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Abstract

This paper has developed a three-sector general equilibrium framework that explains unemployment of both skilled and unskilled labour. Unemployment of unskilled labour is of the Harris-Todaro (1970) type while unemployment of skilled labour is caused due to the validity of the FWH in the high-skill sector. There are two types of capital one of which is specific to the primary export sector while the other moves freely among the different sectors. Inflows of foreign capital of either type unambiguously improve the economic conditions of the unskilled working class. However, the effects on the skilled-unskilled wage inequality and the extent of unemployment of both types of labour crucially hinge on the properties implied by the efficiency function of the skilled workers.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 18004.

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Date of creation: 15 Aug 2009
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Handle: RePEc:pra:mprapa:18004

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Related research
Keywords: Fair wage hypothesis; skilled labour; unskilled labour; wage inequality; foreign capital; unemployment;

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Find related papers by JEL classification:
F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
O15 - Economic Development, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

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  1. Akerlof, George A & Yellen, Janet L, 1990. "The Fair Wage-Effort Hypothesis and Unemployment," The Quarterly Journal of Economics, MIT Press, vol. 105(2), pages 255-83, May. [Downloadable!] (restricted)
  2. Gordon H. Hanson & Ann Harrison, 1999. "Trade liberalization and wage inequality in Mexico," Industrial and Labor Relations Review, ILR Review, ILR School, Cornell University, vol. 52(2), pages 271-288, January.
  3. Marjit, Sugata & Kar, Saibal, 2005. "Emigration and wage inequality," Economics Letters, Elsevier, vol. 88(1), pages 141-145, July. [Downloadable!] (restricted)
  4. 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. [Downloadable!] (restricted)
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  5. Beyer, Harald & Rojas, Patricio & Vergara, Rodrigo, 1999. "Trade liberalization and wage inequality," Journal of Development Economics, Elsevier, vol. 59(1), pages 103-123, June. [Downloadable!] (restricted)
  6. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-44, June. [Downloadable!] (restricted)
  7. Ann Harrison & Gordon Hanson, 1999. "Who Gains from Trade Reform? Some Remaining Puzzles," NBER Working Papers 6915, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  8. Hamid Beladi & Sarbajit Chaudhuri & Shigemi Yabuuchi, 2008. "Can International Factor Mobility Reduce Wage Inequality in a Dual Economy?," Review of International Economics, Blackwell Publishing, vol. 16(5), pages 893-903, November. [Downloadable!] (restricted)
  9. Agell, Jonas & Lundborg, Per, 1995. "Fair Wages in the Open Economy," Economica, London School of Economics and Political Science, vol. 62(247), pages 335-51, August. [Downloadable!] (restricted)
  10. Pieter Serneels, 2007. "The Nature of Unemployment among Young Men in Urban Ethiopia," Review of Development Economics, Blackwell Publishing, vol. 11(1), pages 170-186, 02. [Downloadable!] (restricted)
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This page was last updated on 2009-12-1.

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