Fair Wage Hypothesis, International Factor Mobility and Skilled-Unskilled Wage Inequality in a Developing Economy
AbstractAgell and Lundborg (1995, Economica) have accommodated the fair wage hypothesis (FWH) in an otherwise 2×2 Hechscher-Ohlin-Samuelson model for examining the robustness of certain standard trade theorems. The present paper proposes to introduce the FWH in a three sector general equilibrium model with two types of labour: skilled and unskilled. Skilled labour is specific to the high-skill sector and receives the efficiency wage while unskilled labour in the other two sectors receives either the competitive wage or the high unionized wage. Using such a framework the consequences of international mobility of factors of production on the skilled-unskilled wage inequality and unemployment of skilled labour in a developing economy have been analyzed. Both foreign capital inflows and emigration of skilled labour improve the skilled-unskilled wage inequality under reasonable condition. Particularly, the result relating to emigration of skilled labour is counterintuitive.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 9303.
Date of creation: 20 Jun 2008
Date of revision:
Fair wage hypothesis; skilled labour; unskilled labour; wage inequality; Foreign capital; unemployment;
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
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-07-05 (All new papers)
- NEP-DEV-2008-07-05 (Development)
- NEP-LAB-2008-07-05 (Labour Economics)
- NEP-MIG-2008-07-05 (Economics of Human Migration)
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