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Appropriation, firm dynamics, and wage inequality

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  • Eden S. H. Yu
  • Chi‐Chur Chao

Abstract

This paper examines the income distribution and welfare effects of appropriation activities in an economy. In the short run, with a given number of firms, appropriation can narrow wage inequality between skilled and unskilled labor when the capital resources accrued by appropriators are not large. However, wage inequality widens when the capital accrued is large. In the long run, with free entry and exit of firms, an increase in appropriation can cause firms to enter when the accrued capital is not large. This gives rise to a win–win outcome by raising the wages of skilled and unskilled labor. However, if accrued capital is large, firms exit and a lose–lose situation may occur in which skilled and unskilled wages are reduced.

Suggested Citation

  • Eden S. H. Yu & Chi‐Chur Chao, 2021. "Appropriation, firm dynamics, and wage inequality," International Journal of Economic Theory, The International Society for Economic Theory, vol. 17(1), pages 118-129, March.
    • Handle: RePEc:bla:ijethy:v:17:y:2021:i:1:p:118-129
    DOI: 10.1111/ijet.12294
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    References listed on IDEAS

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    Cited by:

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    2. Jiancai Pi & Shuxi Duan, 2024. "Appropriation and comparative advantage," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 160(4), pages 1277-1304, November.
    3. Dianshuang Wang & Xiaochun Li, 2022. "Capital market distortion, agricultural producer service and wage inequality in the small-scale agriculture," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 69(2), pages 391-409, October.
    4. Shreya Roy & Sugata Marjit & Bibek Ray Chaudhuri, 2022. "Role of Artificial Intelligence in Intra-Sectoral Wage Inequality in an Open Economy: A Finite Change Approach," CESifo Working Paper Series 9862, CESifo.
    5. Leonard F. S. Wang & Ji Sun, 2023. "Corporate profit tax, firm entry with unemployment, and income inequality," Bulletin of Economic Research, Wiley Blackwell, vol. 75(2), pages 380-392, April.
    6. Jiancai Pi & Pengqing Zhang, 2023. "Property rights enforcement and wage inequality," Manchester School, University of Manchester, vol. 91(5), pages 467-481, September.
    7. Jiancai Pi & Shuxi Duan, 2023. "Appropriation, migration, and unemployment," Australian Economic Papers, Wiley Blackwell, vol. 62(3), pages 430-456, September.

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