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Skills Distribution, Migration and Wage Di erences in Pure Service-Exchange Economy

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Author Info
Gupta, Abhay

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Abstract

This paper considers an economy with skilled agents exchanging their services. Using Cobb-Douglas preferences, the paper shows that there exists an optimal (average welfare maximizing) skills' distribution. This optimal distribution is independent of productivity and is welfare equalizing. If the skill-distribution is not optimal, then some agents are better-off than others. In such a scenario, migration in some sectors is average-welfare improving while inviting skilled-agents in others reduces average welfare. "Productivity increase of worse-o sector" without changing the overall skills' composition of economy increases the wage gap.

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File URL: http://mpra.ub.uni-muenchen.de/9000/
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Publisher Info
Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 9000.

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Date of creation: Jun 2007
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Handle: RePEc:pra:mprapa:9000

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Find related papers by JEL classification:
F22 - International Economics - - International Factor Movements and International Business - - - International Migration
L84 - Industrial Organization - - Industry Studies: Services - - - Personal, Professional, and Business Services
J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies

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