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Endogenous skill formation, foreign capital and education subsidy in a dual economy

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  • Chaudhuri, Sarbajit
  • Bandopadhyay, Titas Kumar

Abstract

The present paper develops a three sector Harris-Todaro (1970) type general equilibrium model of unemployment by incorporating endogenous skill formation. Two types of labour are considered: skilled labour and un-skilled labour. We examine the effects of the inflows of foreign capital on the level of unskilled unemployment and skilled-unskilled wage inequality. We find that an inflow of foreign capital raises the skilled- unskilled wage gap and lowers the level of unemployment of the unskilled labour.

Suggested Citation

  • Chaudhuri, Sarbajit & Bandopadhyay, Titas Kumar, 2012. "Endogenous skill formation, foreign capital and education subsidy in a dual economy," MPRA Paper 41631, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:41631
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    References listed on IDEAS

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    More about this item

    Keywords

    skill formation; foreign capital; education subsidy; wage inequality; unemployment;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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