Skills Formation And Wage Inequality In Developing Countries: A Theoretical Analysis
AbstractThe paper is purported to analyze the impact of skill formation on the skilled-unskilled wage inequality using a few variants of the HOS-type framework. It shows that the effect of skill formation on the wage inequality depends crucially upon the technologies of production of the economy and institutional nature of the markets for unskilled labour. In the extreme case when all unskilled labour markets are distorted any attempt of skill formation unequivocally accentuates the wage gap and may increase the level of unemployment of unskilled labour. These results point out that the empirical evidence as found in Beyer, Rojas and Vergara (1999) and the World Development Report (1995) that skill formation has contributed in reducing the skilled-unskilled wage gap in some developing countries lack solid theoretical bearing. The paper suggests that institutional reform programs, designed for the removal of labour market distortions, should be given high priority along with skill improvement measures to improve the skilled-unskilled wage inequality in the developing countries.
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Bibliographic InfoPaper provided by EconWPA in its series Labor and Demography with number 0511009.
Length: 18 pages
Date of creation: 09 Nov 2005
Date of revision:
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Skilled labour; unskilled labour; wage inequality; skill formation; institutional reform programs;
Find related papers by JEL classification:
- D50 - Microeconomics - - General Equilibrium and Disequilibrium - - - General
- J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
- I28 - Health, Education, and Welfare - - Education - - - Government Policy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-11-12 (All new papers)
- NEP-CSE-2005-11-12 (Economics of Strategic Management)
- NEP-HRM-2005-11-12 (Human Capital & Human Resource Management)
- NEP-LAB-2005-11-12 (Labour Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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